News that the EU and the UK had agreed a 21-month Brexit transition deal propelled sterling higher yesterday but some gains were subsequently lost as doubts crept in. Sterling faces a difficult week between today's CPI, tomorrow's BoE meeting and the EU summit in Brussels on Thursday and Friday.
Article / 15 September 2016 at 12:29 GMT

S&P 500: Ship steadies at key support level

Technical Analyst / FuturesTechs
United Kingdom
  • 2,116-2,120 is a really big area of support
  • The support area is holding very firm
  • Quadruple witching in futures and options Friday
  • We may soon see new all time highs
 Beware Friday's "quadruple witching". Photo: iStock

By Clive Lambert

The S&P 500 sold off hard last Friday after gapping lower. On Monday we got a good chunk of this back, then Tuesday saw selling once more. Yesterday was mixed. One thing's for sure, after a period of a couple of months when things had got really "tight" we'd certainly seen volatility returning in style!

A look at the chart for the "Cash" actually tells us something that wasn't so clear on the Futures charts that I usually favour; that 2,116-2,120 is a really big area of support... and so far it's being defended with some vigour.

Chart 1: S&P 500 Index showing 2,116-20 as important support level.
S&P 500 Daily

Source: CQG

If you look back to June we topped out at 2,120 before the big Brexit selloff. We know what happened from here but one of the key dates on the way back up was July 8 when we broke above that June high at 2,120, posting a large green candle with Marabuzo support at 2,118. This week's selling has seen us return to this area. Not only that but if we "do the Fibonacci thing" from the June 27 low to the August 15 high we see that the 38.2% retrace of this move is 2,116. So a big area of support, and it's holding firm!

The next week or so is not without it's share of challenges or events for the market. Tomorrow sees the "quadruple witching" when futures and options expire on US Equity Indices, something that can and does cause spikes in interest and volaility. Then we have the Fed next week, of course.

From a chart persepctive the bulls need to keep doing the work they've been doing in defending this 2,116-20 area, otherwise there's scope for a move back to 2,058-68 where we have the 200-day simple moving average and the deeper 61.8% Fibonacci level.

But all the time we're above this key area of support I'd be favouring the bulls and think we'll soon see new all time highs. One thing I was saying throughout the summer was that tops don't look like this. Tops are not "flat" affairs. I must admit I thought we'd break the summer impasse to the upside, so I was wrong about that, but on the basis of everything I've said above I don't think the bulls are done yet!

Chart 2: Weekly Bar chart - Just in case you this latest the selloff was scary or worrying... doesn't look such a problem on this timeframe, does it?!

S&P 500 Weekly
Source: CQG

Take care out there, especially on tomorrow's "witching"! 

– Edited by Clare MacCarthy
Clive Lambert is chief technical analyst at FuturesTechs

Magpies Magpies
funny mental case says, rates lower for longer, buy.
Clive Lambert - FuturesTechs Clive Lambert - FuturesTechs
Indeed, I concur. ;-)
Michael Liu Michael Liu
Agree with you, this is not a top
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