On Thursday, the S&P 500 reached a new course low at 1810.10. It was matter of a low that is going to cause a relief for now, at least for 5 trading days. The recovery rally from the 1810 low will attain at least 1888 index points. Friday was day # 1 of the bounce. With more than an 80% of probability, the 1888 will be worked off at the latest till next Friday 02/19 = day # 5 of the bounce, yet with nearly 100% of probability, it will be till the 10th day of the bounce = Friday 02/26.

==> The bears will have to keep calm for the time being, till the 1888 will have been reached awaiting what will be happening at the 1888, what the market will be performing like. If the month of February closes above the 1888, most certainly the bounce will last more than 10 trading days = 2 weeks. In that case, it will last minimally 3 weeks then, maximally 4 weeks being able to reach the 1940 weekly horizontal resistance area once more.

==> Therewith, the bounce will end either within 10 trading days (2 weeks of bounce) around the 1888 or – at the latest – after 4 weeks (20 trading days) around the 1940.

==> If a week closing price above 1950 succeeds within the next 5 weeks, the current correction move that indeed began at the 12/2015 high should definitely have to have come to an end at 1810. In such a case, the 1810 low might even have been the year low 2016, with a 40% of probability.

==> If a week closing price above 1950 succeeds within the next 5 weeks, the alltime-high (ATH) will possibly be attacked again at 2134 till June 2016 – after Gann it would be allowed in that case.

Now, the 1888 is the decisive bounce resistance for February 2016:

 

 

Above in the monthly chart, you see the developments, beginning at the ATH.

With the ATH, a 5 month initial down impulse started ending at the September 2015 low. Down there, we draw the Blue Arc thereby. From the Blue Arc support, the market bounced upwards once more, into the November + December 2015 highs. There, at the 1*2 Angle – first important ATH resistance – the C-wave of an ABC correction began, technically being supposed to go down to the 1st double arc support in order to finish there in April 2016 at about 1760 (ST = Sell Target).

With its opening already, January 2016 lost the 1*1 Angle = normally strong ATH support. As a result, some enormous downwards forces were released. Thus, the January 2016 candle already pierced the Blue Arc as well as the 1865 first square line. January 2016 newly closed above the Blue Arc and the first square line support however, both items being now magnets not only on monthly but also on yearly base!

The January as well as the present February 2016 candles tested/are testing the important 1820-1814 support area.

1820-1814 is important for the market because it’s matter of a horizontal support area coming from the year 2014. 1820-1814 is yearly support area. Thus, the year 2016 is testing the important yearly horizontal support at present that was pre-defined in the year 2014. That – because 1820-1814 is obviously yearly support – is why the S&P 500 is heftily struggling against falling below at the moment.

Exactly with the weekly close, the index escaped again from the 1810-Thursday low to the 1865 that is the first square line horizontal. This magnet is monthly, but also yearly support = combined support magnet on monthly + yearly base = STROOONG SUPPORT. ==> So, the index defended monthly as well as yearly support with the close at 1864.78 successfully.

I think, the fact that the index succeeded again in avoiding the generation of a new sell signal this week defending the 1820-1814 as well as the 1865 is a certain indication of inner force!!! Isn’t it?

I think, since the 1865 withstanded a serios bear attack, the index will have to schedule up the backtest of its currently most important resistance on yearly base!

For February 2016, it’s the 1888. This is where a Resistance Angle starting from the ATH = ATH Resistance Angle intersects the Blue Arc. Since the price is situated below the Blue Arc at present, this magnet is the next higher attainable resistance on yearly base.

==> If the 1888 is thereby overcome still in February, the current bounce will have to be ongoing into March certainly lasting 4 weeks instead of 2! Sic.

Yet, if the 1820-1814 falls, consequently the next important support area below 1820-1814 will, yeah has to be headed for. In this special case, it’s the 1st double arc support environment.

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You should imperatively recall the deduction why technically the stock markets ought to be in an ABC correction wave and technically the S&P 500 ought to reach just the 1760 in April 2016 – consulting again the important fundamental contribution: free GUNNER24 Forecasts, 01/17/2016, „The current ABC correction in the bull market":

 

 

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Let’s continue the current topic: 1820-1814 is yearly support horizontal. In 2016, the lowest daily close of the S&P 500 is at 1829, reached last Thursday.

==> Signal situation:

A) A daily close below 1820-1814, i.e. a daily close below 1814 will activate the 1760 till April 2016, ultimately and finally!

B) If February 2016 closes below 1888 i.e. below the Blue Arc, the 1st double arc at 1760 will not be activated finally but be reached till April 2016 with a 60% of probability.

C) If February 2016 closes below 1865 i.e. below the first square line yearly resistance horizontal, the 1s double arc will definitely be activated being expected the 1760 to be reached till April 2016 in that case with an 80% of probability.

D) If February 2016 closes above the 1888 yearly resistance magnet however, some higher bounce targets will be activated, therewith we are switching now into the weekly time frame:

 

 

Well, this way we are coming to the derivation why at least a 1-2 week bounce is due now reaching 1888 resp. to the option that even a 3-4 week bounce is pending that may reach the 1940 again.

This 12 candle weekly up setup starts at the August 2014 spike low. The chiefest important realization we gain from this setup is that the market minds and takes seriously the 1st double arc magnet FOR MONTHS. We got the first evidence for that at the 07/2015 high, marked with the red oval. This first lower important high after the ATH was brought in exactly at the lower line of the 1st resistance. A hefty, several month decline started thereupon. After the 2015 double low (green oval), up again it went into the respective lower 11+12/2015 highs. Even though both important lower highs were achieved above the 1st double arc, the market was never be able to really get rid of the downwards directed magnet. Obviously, the market was pulled down by the 1st magnet after the attained 11+12/2015 highs.

 

Proof: At the blue circles, some important weekly lows were brought in at the lower and upper lines of the 1st. In the week when the lower line of the 1st intersected the time axis, the first leg of the possible double low bottom might have been brought in. The current candle may have marked now the second important pillar of a double low bottom… and newly, a line of the 1st intersected the time axis. This time it was the upper line of the 1st.

Hence we may have identified a double bottom in the weekly time frame that is most likely to have been influenced by both lines of the 1st. In the chart above, it’s visualized with both thick orange dotted verticals provided with the indication "2016 double low??!!".

Please consider now the current weekly close at 1864.78. This weekly close could escape above the upper line of the 1st indeed in a downright proverbial way!!! So, the week closed above the upper line of the 1st, thereby bearing important support! Moreover, it closed exactly at the 2016 yearly support of the first square line horizontal! Thus, the week defended weekly + monthly + yearly support!

The week was even estimated much lower being pressed down by the upper line of the 1st. Here’s the weekly state on the Thursday close. In my Trade of the Day service incl. current Trade of the Day 02/12 Assessment of the Situation, I forwarded the following chart on Friday morning:

 

 

Before the Friday trading, I already presumed the 1810 low of Thursday to be a bear trap, simply because it looked as if the magnetic force were not able to finally crack the 1820. Since the magnetic effect of the upper line of the 1st was literally in its final throes only having left Friday for influence the market – but the US stock futures and the EU stock markets being mightily green already the resistance influence of the upper line of the 1st seemed to be finished with the 1810 low of Thursday.

==> When we can identify that a magnet with past influence on the market over months – mainly in a negative way – having driven and forced it into important lows = potential double low 2016, now has lost its influence, a bounce has to be imminent.

Since the 1st is matter of a weekly magnet, the bounce will have to be imminent in the weekly time frame as well. So it will have to be ongoing 1, 2, 3, it may even last 5 weeks. Since we work on the assumption that the correction in the monthly time frame cannot have finished yet, this bounce will have to come to an end in terms of price at an important resistance magnet.

==> A look at both weekly charts makes clear that the logical target of this bounce will have to be the 1890-1880. That’s where the 1*1 Resistance Angle proceeding from the ATH takes its course, for next trading week at 1890 (1 week of bounce) and for the trading week after next at 1880 (2 weeks of bounce). The ATH 1*1 Resistance Angle in the weekly time frame thereby confirms with the 1888, the most important yearly resistance of the month of February 2016.

As soon as the bounce succeeds in closing February 2016 above the 1888, it will therewith have to run into the 1940 region within 4 weeks, because in that case it would overcome the combined weekly + monthly + yearly resistance. 1940 is strong future horizontal resistance in the weekly time frame!

 

Be prepared!

 

Eduard Altmann