Trading plan for Dec. 9, 2013
Weekly outlook - S&P 500 Cash Index (SPX)
The S&P 500 cash index ($SPX) closed at 1805.09 on Friday, down 0.72 points for minor weekly loss.
Last week, SPX was down with a tiny loss. But it signalled that the strong economy eventually overcame fear of the Fed tapering. The SP500 has now closed above the psychologically-important 1800 level three weeks in a row. The bulls remain in the drover's seat.
This is rollover week for index Futures contracts. The volatility will remain high as it was last week. The market starts to shift attention from the time-line for possible Fed tapering to the condition of the economy. Good economic reports could help to hold price up above the 1790 line to enable new highs.
Weekly Chart - SPX
SPX had a early week pullback last week, but quickly found a support level around the 1780 area. For the short-term, the buyers regain control above 1796.50 level, which is bullish. We expect the market to slowly make new highs through to the end of the year.
Based on wave principles, the SPX remains in a major force wave 3, which will be the strongest, longest and most extended wave in this sequence. This wave 3 could end its first target in the 1850 area or higher up to 2050 level, depending on how the market reacts to unpredictable external events or economic data.
Based on pattern, since SPX broke out of the long-term consolidation sideways range (1576 to 666 level), the long-term chart can be treated as double bottom pattern. That pattern is still developing and has not yet reached its first measurement target 1838-40. As long as SPX stays above 1775 level, it is likely to achieve the first target or higher.
Based on time, the market is in a “Santa Rally” holiday sentiment period. Good economic reports can cheer up formerly anxious or depressive investors. As long as SPX continues to close above the1800 psychological level, holiday seasonal buyers will keep pushing price higher for short time.
Monthly resistance 1850 and support 1725; Weekly resistance 1830 and support 1785
Daily Outlook - S&P500 e-mini futures (ES)
ESZ3 Daily Chart
After 5 days of declining, ES fond its support level at 1784 area and moved back up for closing above 1800 level. Last Wednesday's low at 1777.75 could be the short-term low for the next leg up toward the 1850 destination. ES will continue to struggle with long-term resistance line at 1812.50-16.50 zone. But as soon as it overcomes that resistance, price could be pushed up to the 1840-1850 zone.
Based on daily chart, the 1784.50 level is a major support zone with several minor supports at 1796.50, 1792.75 and 1787.50. As long as the buyers won't give up those support levels, ES could continue to challenge its long-term resistance line by pushing the price up to the 1827.00-26.50 zone or higher up to 1837.75-1840.25.
Date Added: 2013-12-08 14:34:26