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Technical analysis for S&P 500
Written by article default Tuesday, 09 November 2010 12:21
A break of 1195.00 will cause a bullish direction, targeting 1212.00-1216.00 and that is exactly what happened.Since the daily closing was achieved above 1195.00, the index soared, reaching the previously suggested areas. Now, we will depend on a harmonic structure that might push the index further to the upside. It is the crab pattern, where its CD leg could extend towards 161.8% Fibonacci projection of XA leg. Actually, we will suggest a nearer technical objective until it proves that it will touch 161.8% level.
This technical objective resides at 127.2% -D1- where a butterfly pattern could be completed, despite the crab pattern is the most recommended due to its correction ratios and when it breaches D1, we can talk about the extended targets.
The above seen harmonic formation suggests that the stable move above 1182.00 -161.8% of BC leg- will be a technical motive for resuming the upside actions, whilst stabilizing above 1215.000 -X point- increases the probability of touching 127% Fibonacci, where it will meet 261.8% of BC leg at 1272.00.
Actually, the symmetry of Fibonacci ratios made us expect the resumption of CD leg of the butterfly pattern despite the pattern is not completely ideal.
To recap, the index will be moving positively as far as it is trading above 1182.00, while a stable move above 1215.00 will add further confirmation to the aforesaid scenarios.
The technical targets reside at 1272.00 but we should note that momentum indicators are currently showing overbought signs; particularly Stochastic and that might cause some kind of fluctuation and correctional movements.
The stability above 1182.00 and 1195.00 -start point of the upside wave- is required to make us keep our scenario intact.