Since December 26th, the S&P 500 cash index has been trading in a recovery mode and last week, it managed to break above the downside resistance line drawn from the high of October 3rd. What’s more, the index emerged above the resistance (now turned into support) barrier of 2715 yesterday, confirming a forthcoming higher high on the 4-hour chart. In our view, all these signs keep the near-term outlook positive.
We believe that the break above 2715 may have opened the way for our next resistance zone, at around 2765, marked by an intraday swing low formed on December 4th, as well as the high of November 30th, above which the market opened with a positive gap the following week. Now, in case the bulls do not see that barrier as an obstacle and push the price through it, then we may experience extensions towards the next key area at 2815, which provided strong resistance on October 17th, November 7th and 8th, as well as on December 3rd.
Our short-term oscillators detect upside speed and support the case for this index to continue drifting north for a while more. The RSI lies within its above-70 zone and points up, while the MACD, already positive has just poked its nose above its trigger line.
On the downside, we would like to see a clear dip back below 2676 before we abandon the bullish case. Such a move would bring the index back below the downside line drawn from the high of October 3rd and may initially pave the way towards the 2625 zone. Another break lower, below 2625, may extend the slide towards our next support area of 2600, near the lows of January 16th and 17th, as well as the inside swing peak of January 10th.
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