sp 500 weekly outlook 24 aug to 28 aug decline appears overstretched risk of a snap back rally below

(Click to enlarge charts)

What happened earlier

The U.S. SP 500 Index (proxy for the S&P 500) has broken below the 2040 lower boundary (support) of a long-term ascending channel in place since 21 October 2011 and 55-week Moving Average that held every decline in the Index since 03 June 2012.

Key elements

The Index has broken below the 5-months sideways range configuration in place since late February 2015 now turns pull-back resistance at 2050/2040. It has tumbled by 10% from its 2138 high seen on 19 May 2015 (see weekly & daily charts).
The long-term RSI oscillator has broken below its support and shows further downside potential (see weekly chart).
The current low at 1915 coincides closely with the 2.00 Fibonacci retracement from the 19 May 2015 high to 20 July 2015 high with the daily Stochastic oscillator at its extreme oversold level (see daily chart).
The short-term Stochastic oscillator has flashed a bullish divergence signal at its oversold region which suggests a possible short-term rebound in price action of the Index is round the corner after a steep decline seen last week (see 4 hour chart).
The medium term resistance to watch will be at 1980 follow by 2000 (38.2% Fibonacci retracement of the recent steep decline from 20 July 2015 high to the current 24 August 2015 low (see 4 hour chart).
The next significant long-term support stands at 1890 which the horizontal support on March 2014/October 2014 and the 23.6% Fibonacci retracement of the long-term upside movement from 02 October 2011 low to the 19 May 2015 current all-time high (see weekly chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 1980

Pivot (key resistance): 2000

Support: 1890

Next resistance: 2050/2040

Conclusion

Technical elements suggest that the Index is likely to see another down leg as there are no signs of a potential recovery yet. However, the current decline appears to be overstretched and the Index may see a short-term rebound first at this juncture towards the intermediate resistance at 1980 with a maximum limit set at the 2000 weekly pivotal resistance before another decline occurs to target the long-term support at 1890.

On the flipside, a clearance above the 2000 pivotal resistance is likely to negate the bearish tone to see a further squeeze towards the significant pull-back resistance at 2040/2050.

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