S&P 500 Forecast October 16, 2014, Technical Analysis

The S&P as you felt pretty strong during the session on Wednesday, testing the 1820 level. However, we get enough support below to turn the market back around and form a massive hammer. With this, the hammer does in fact suggests that we could get a pretty significant bounce at this level, but we need to see the market break back above the 1900 level. On a move above that level, we would be buyers as that would reenter the previous consolidation area and break back above which should now be resistance.

The S&P 500 has declined rather rapidly of the last couple of sessions, so a bit of a bounce would be that huge of a surprise. Ultimately, the market appears as if it’s going to head to the 2000 level, and then possibly higher than that if we can in fact break above the aforementioned 1900 level. Any pullback at this point in time though would have the market participants fairly scared, but we believe that 1800 will be rather supportive, just as 1900 should have been. The market certainly will have detractors as far as selling it, as it seems that this market continues to be one that you can “buy on the dips”, as we’ve seen over the last three years. However, there are some concerns based upon economic numbers out of the United States during the session on Wednesday they could show that there are some cracks in the wall appearing.

Regardless, you have to keep in mind that the financial markets typically are a relative game, meaning that some markets will do better than others given enough time, they simply because they “aren’t as bad.” We believe that’s what’s going to happen in the S&P 500 and the US stock markets in general, but this correction has been long overdue and we feel that a lot of the weaker players will have been shaken out recently. That of course is normally good for the longer-term uptrend, so we are waiting to see that move above 1900 and order to serve buying, or some type of supportive candle below in order to buy as well.