The S&P500 has been contained in a triangle since our last report. The momentum has been dead neutral as the RSI has been contained between 40 and 60. This followed a dip from above 70 to 30, which means the preceding bullish momentum was also neutralized. The only bullish bias is that it is trading above a rising 200-period simple moving average in the 4H chart. It should be noted however that the market is trading under the 200-day SMA.
Bullish Idea: Elliott Wave structure for a trianglecorrection is conventionally 5-waves, abcde. The S&P500 indeed has completed its 5th wave. It is possible that now, as the 200SMA in the 4H chart catches up, the market is ready to continue upwards. The last 2 times the market tested the projected trianglesupport , we each had a strong bullish 4H candle that was then followed by a rally toward the triangleresistance . If the current 4H candle forms a doji , and a strong bullish candle pushes back above 1240 , we can be looking at a similar scenario to the upside in the short-term. Upside is contained below the high near 1288 for now.
Bearish Idea: A break of the triangle to the downside is first limited to 1210-1211 area. Below this, we can see a sharper correction toward 1177 , which is near 50% retracement of the 1087.73-1286.93 . 1151.50 (61.8% retracement) would be a slightly more aggressive outlook in the short-term. A break below 1150 , opens up the 2011 low near 1076 .
Forex market implications: A bounce from trianglesupport suggests a reversal in USD and JPY crosses. The USD and JPY has been gaining from risk aversion, so risk-on trading associated with a rally in the Spoo should be seen along fading of USD and JPY strength. On the other hand EUR , AUD, GBP , NZD, and CAD should gain. CHF has been tracking EUR , so it might rally as well against the USD and JPY.