S&P 500 Index near term could pull back to the 50 day moving average key support zone amid weakening momentum indicators

S&P 500 Index advanced to a new record high at 1991.39 (24 July 2014) (near the rising wedge resistance on the monthly chart in log scale) before consolidating. (please refer to the monthly chart in the prior post.)

Near term, with potential negative daily RSI divergence from the price (linking 1985.59/1991.39 highs) and MACD below the signal line, there is scope for prolonged consolidation within the 4-1/2 week rising wedge (linking 1985.59/1991.39 highs and 1944.69/1955.59 lows on the daily chart). If the 1991.39 peak manages to cap near-term, the index would retest the 1952.86 higher low near the 50 day moving average currently at 1950.24 which may contain pullbacks.

A move back above 1991.39 is needed to complete a higher base and signal resumption of broad uptrend towards the 2000.00 psychological level). Above there would open the next Fibonacci target at 2047.41 (projected 666.79/1364.56 from 1074.77).

On the downside, if the index breaks below the 50 day moving average, it would suggest near-term topping and trigger further weakness towards 1944.69. Below lies the 1925.78 and 1902.17 near the bull channel support (from June 2013 low).

Strategy

Buy on pullbacks to 1950.00 area

Stop below 1950.00

Target 2000.00

Sell on rallies to 1944.00-1950.00 area

Stop above 1950.00

Target 1900.00

S&P 500 Index daily