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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Wednesday June 7, 2017.

We’ve noted in the previous Market Outlook that: “S&P shifted into a holding pattern as traders wonders whether more gain is warranted given the massive advance over the past months.”  As anticipated, stocks closed lower Tuesday as traders positioned ahead of ex-FBI Director James Comey’s testimony and the UK general election.  For the day, the Dow Jones industrial average fell 47.81 points, or 0.23 percent, to close at 21,136.23.  The S&P slipped 6.77 points, or 0.28 percent, to end at 2,429.33.  The Nasdaq declined 20.63 points, or 0.33 percent, to close at 6,275.06.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 3.77 percent to 10.45.

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Tech Data Corp (TECD) was a notable winner Tuesday, jumped 1.91 percent to 102.05 – a fresh all-time high.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of TECD suggests that the stock could climb above 120 in the coming days.  Just so that you know, initially profiled in our October 19, 2016 “Swing Trader BulletinTECD had gained about 27% and remained well position.  Below is an update look at a trade in TECD.

The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges.  As shown, the underlying is in a short-term bullish trend when the price bars are painted in green.  The underlying is in a short-term bearish trend when the price bars are painted in red.  The yellow bars identify period of neutral or sideways trading pattern.  Additionally, the light-blue shading represents the short-term trading range.  A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).  Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

TechData_20170606

Chart 1.1 – Tech Data Corp. (daily)

Our “U.S. Market Trading Map” rates TECD as a Buy. The overall technical outlook remains Bullish.  Last changed May 31, 2017 from neutral.  Over the past few days, TECD has been trending lower in a short-term corrective mode after the late May rally ran into resistance near the 127.2% Fibonacci extension.  The correction tested support at the late May breakaway gap.  Tuesday’s bullish reversal bar suggested the support should hold.  Money Flow measure held firmly above the zero line since the stock reached an interim low in early April.  This is a bullish development, supporting a breakout above the 127.2% Fibonacci extension and a rapid advance toward the next level of resistance at the 161.8% Fibonacci retracement, near 120.

TECD has support near 97.  Short-term traders could use that level as the logical level to measure risk against.

After being down for most of the second half of 2016, the SPDR Gold ETF (GLD) has been positive month-over-month in 2017, up 12.31% year-to-date.  According to our “U.S. Market Trading Map”, there could be more gains ahead for the ETF.  Below is an update look at a trade in GLD.

GoldETF_20170606

Chart 1.2 – SPDR Gold ETF (daily)

Our “U.S. Market Trading Map” painted GLD bars in bright green (strong buy).  GLD has been on a tear in recent weeks after the April downswing found support near the March low.  Tuesday’s breakout pushed GLD above the April high, signify a bullish breakout.  Money Flow measure held mostly above the zero line since the ETF reached an interim low in late 2016.  This is a bullish development, supporting further upside follow-through and a retest of the 2016 high near 131.  Resistance stands in the way of continue rally is at the November high, near 124.

GLD has support near 120. Short-term traders could use that level as the logical level to measure risk against.

Sp500_CEM_20170606

Chart 1.3   – S&P 500 index (daily)

Short-term technical outlook shifted to neutral.  Last changed June 6, 2017 from bullish (see area ‘A’ in the chart).

[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]

S&P fell below the red band after climbed above that level last week.  Right now, follow-through is the key.  Support is strong near the 2400 zone, based on the lower boundary of the pink band   with Money Flow measure above the zero line, the path with least resistance remains higher so it should not be surprising to see the index regroup and rebound from near 2400.

Short-term trading range: 2409 to 2436.  S&P has minor support near 2408.  Below it a more significant support lies at 2400.  This creates a strong band of support between 2408 and 2400. If the index starts coming under 2400, it would imply more supply is coming into the market.  And S&P might have to move to a much lower level to attract new buyers as a consequence. As for resistance, the lower boundary of the red band, near 2436, represents key price level.  A trade above that level indicates overbought conditions.

Long-term trading range: 2350 to 2450.  Unless there is a headline that everyone recognizes as extremely positive or negative, expect S&P to swing within this 100 points range.

Bottom line, S&P shifted into short-term consolidation mode.  The index could signal an extended downward trajectory, depending on how it closes over the next few days.  The medium-term technical backdrop however, remains bullish so buying into short-term market dips still the most profitable strategy.

 

(By:Michelle Mai for Capital Essence)

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