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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday June 13, 2017.

We’ve noted in the previous Market Outlook that: “Friday’s spinning bar together with prolong overbought conditions suggested strongly that the S&P is in a process of building a significant market top.”  As anticipated, stocks closed lower on Monday amid renewed pressure on technology stocks.  For the day, the Dow Jones industrial average fell 36.30 points, or 0.17 percent, to close at 21,235.67.  The S&P declined 2.38 points, or 0.1 percent, to end at 2,429.39.  The Nasdaq pulled back 32.45 points, or 0.52 percent, to close at 6,175.46.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 7.10 percent to 11.46.

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ManTech International Corp (MANT) was a notable winner Monday, jumped 1.96 percent on strong volume to 40.65.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of MANT suggests that the stock could climb above 45 in the coming days.  Just so that you know, initially profiled in our May 18, 2017 “Swing Trader BulletinMANT had gained about 8% and remained well position.  Below is an update look at a trade in MANT.

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.

ManTech_20170612

Chart 1.1 – ManTech International Corp. (daily)

Our “U.S. Market Trading Map” rates MANT as a Buy. The overall technical outlook remains Bullish.  Last changed May 2, 2017 from neutral.  MANT has been on a tear in recent days after the May correction retested and respected support at the early May breakout point.  Monday’s advance pushed the stock up against the May high.  Money Flow measure held firmly above the zero line since the stock reached an interim low in early April, suggesting there was little selling pressure.  This is a bullish development, supporting further upside follow-through and a retest of the late 2016 high, just above 45.  Resistance stands in the way of continue rally is at the May high, just above 41.

MANT has support near 37.  Short-term traders could use that level as the logical level to measure risk against.

The headlines haven’t been great over recent days, yet homebuilders is nearly back to its recent high. The SPDR S&P Homebuilders ETF (XHB) is a whisker below the 52-week high set in early April. 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 XHB.

HomebuildersETF_20170612

Chart 1.2 – SPDR S&P Homebuilders ETF (daily)

Our “U.S. Market Trading Map” painted XHB bar in bright green (strong buy).  Last week’s outperformance pushed XHB up against key technical level at the April high.  Money Flow measure is most above the zero line since the ETF reached an interim low in April, indicating there was little selling pressure.  This is a bullish development, supporting a rapid advance above the April high and up to the next level of resistance at the 127.2% Fibonacci extension, just above 40.

XHB has support near 37. Short-term traders could use that level as the logical level to measure risk against.

Sp500_CEM_20170612

Chart 1.3   – S&P 500 index (daily)

Short-term technical outlook remains bullish.  Last changed June 8, 2017 from neutral (see area ‘A’ in the chart).

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

S&P basing sideways near the lower boundary of the pink band after recent test of resistance at the upper boundary of the pink band was met with a wave of massive selling pressure.  Short-term momentum has weakened and overbought conditions are widespread enough to suggest that the pullback will continue this week.   Right now the most important level is watch is the lower boundary of the pink band, just above the important sentiment 2400 mark. That level is significant in charting terms.  A failure to close above that level on a weekly basis signifies a significant trend shift.

Short-term trading range: 2415 to 2445.  S&P has minor support near 2415.  Below it a more significant support lies at 2400.  This creates a strong band of support between 2415 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 2445, represents key price level.  A trade above that level indicates overbought conditions.

Long-term trading range: 2380 to 2480.  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 remains in a consolidation phase that reflects an indecisive market.  While near-term risk is greater to the downside, trading sentiment remains strong so sell-off should be shallow and quick because the sideline money will try to fight its way back into the market.

 

(By:Michelle Mai for Capital Essence)

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