S&P: Strong Bullish Day To Reverse Trend

Bulls made a dynamic comeback yesterday. The upward move that we were expecting to start from next week came earlier and caught us by surprise while we were expecting a shallow bounce and a new low towards 1630. Yesterday’s upward move was not just a bounce. It was a strong buy signal from bulls and a sign that the year could end with a new all time high. October is usually a month where big declines occur, but its most common characteristic is its increased volatility. What about S&P now? Are we in a bullish trend or is the 1646 going to be challenged? We believe that yesterday’s upward move has tipped the scales in favor of the bulls.

SPX has found support in the Ichimoku cloud we mentioned many times before. The upward move is so strong that we believe we are going to see this move continue higher. Bulls will first need to break above the 1695-1700 resistance that was so much tested before the move to 1646. Additionally prices if they break above that level, it will have also moved above the 61,8% Fibonacci retracement as shown below.

It is also important to note that the decline from 1730 to 1646 is most probably corrective as there is no clear impulsive move down. This increases the chances of a new upward move starting at 1646. This increases the chances of a new all time high towards 1735-1750.

The EMA triggers have been crossed by the index price and have now produced bullish signals. Of course we should expect a small pull back towards 1670 in order to enter long with 1650-46 stop. Bulls do not want to see a new low below 1646 as this will signal a potential decline towards 1580-90. On the other hand, the resistance at 1700 must be broken upwards. This we expect to happen after a small pull back towards 1670-66.

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