- Wall Street extends recovery
- US500 trades close to 78.6% Fibo level
- Index is trading within an ascending wedge pattern on the lower frame
The ongoing rebound on Wall Street is really strong and the US500 index (S&P 500 futures underlying) managed to add over 20% since the December’s trough. Taking a look at the weekly interval, one can see that the downward impulse was halted by the upward sloping trendline and 200-week moving average. Moreover, it should be noted that the absolute scale of the October-December sell-off (in terms of points) was over twice as big as the corrections from 2011 and the turn of 2015/2016.
On the daily frame one can see that US500 is approaching the 78.6% Fibo level of the latest downward wave. Local highs from October and November can be found in this area as well therefore bulls may find it a bit harder to overcome.The 200-session moving average running in the 2750 pts area can be seen as the first support level for buyers in case a bigger pullback should occur. Channel formed by 50-session moving averages (red lines) can be seen as the next potential stop in line.
Moving onto the intraday chart, it is hard not to see that the index is trading within an ascending wedge pattern. Such a price schemes heralds a break lower and given diminishing volatility, the risk of correction occuring is growing everyday. Moreover, the price is approaching the resistance zone ranging 2815-2820 pts which may limit further upside. A break below the 50-period moving averages channel could be seen as the first signal potentially confirming deeper correction.