While the market takes a tumble the past week, breaking SPX out of the mid-term channel, the major uptrend is still intact. With that said, lets look at the few levels that would invoke a response and more importantly how we can trade this market moving forward.
With a nice base formed in Apr 2017, SPX embarked from an uptrend from 2330 to the higher of 2480 in Aug 2017. We put on a fibonacci retracement for this rally, and thus able to identify the few key fibonacci levels namely:
78.6% – 2450
61.8% – 2424
50% – 2410
As the chart shows, SPX has already broke out of the mid-term up channel and entered a tighter short term down channel. The bottom of the short term channel coincided with the 61.8% level which translate to SPX possibly stopping the slide and bounce up from this level. Further downside for SPX remains at 2405 level should the slide continues in the coming week.
Price action lately seems to suggest the bears are in control lately; marked by the ferocious bear candles and lack of bullish fight back in the recent cluster of price action.
I am more inclined for a bounce towards 2450 level (both a resistance and 78.6% fib retracement level) in the coming week, then prices continue to test 2425 and then 2410 towards the end of the coming week or early next week.
Jackson Hole remains on Fri/Sat which is going to keep the market in suspension as to what Yellen or other key officials will say. It’s unlikely for SPX to continue sliding in a fiercer fashion early week unless there are external catalysts such as escalated row with North Korea.
In summary, after such a “fierce” session last Thurs, I am expecting SPX to bounce at least to the middle of the channel (2440-2450) and then bearish pressure to continue towards the end of the week.