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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Wednesday June 14, 2017.

Equity market closed higher on Tuesday amid strength in large-cap technology stocks.  For the day, the Dow Jones industrial average rose9 2.80 points, or 0.44 percent, to close at 21,328.47.  The S&P gained 10.96 points, or 0.45 percent, to end at 2,440.35.  The Nasdaq advanced 44.90 points, or 0.73 percent, to close at 6,220.37.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 9.07 percent to 10.42.


Penn National Gaming Inc. (PENN) was a notable winner Tuesday, jumped 3.06 percent on strong volume to 21.90 – a fresh 52-week high.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of PENN suggests that the stock could climb above 23 in the coming days.  Just so that you know, initially profiled in our June 6, 2017 “Swing Trader BulletinPENN had gained about 13% and remained well position.  Below is an update look at a trade in PENN.

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.


Chart 1.1 – Penn National Gaming Inc. (daily)

Our “U.S. Market Trading Map” rates PENN as a Buy. The overall technical outlook remains Bullish.  Last changed June 5, 2017 from neutral.  Over the past few days, PENN has been trending lower in a short-term corrective mode as it worked off the overbought conditions.  The correction tested and respected support at the 127.2% Fibonacci extension.  Tuesday’s advance pushed the stock above last week’s, signified a bullish reversal.  Money Flow measure held firmly above the zero line since the stock reached an interim low in early 2017, suggesting there was little selling pressure.  This is a bullish development, supporting further upside follow-through and a test of the 161.8% Fibonacci extension, just above 23.

PENN has support near 20.80.  Short-term traders could use that level as the logical level to measure risk against.

It’s important to note that healthcare remains resilient with the Health Care Select Sector SPDR ETF (XLV) closed at record high Tuesday.  XLV outperformed the boarder market, up more than 12 percent 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 XLV.


Chart 1.2 – Health Care Select Sector SPDR ETF (daily)

Our “U.S. Market Trading Map” painted XLV bars in bright green (strong buy).  It’s currently testing resistance just below the 78 zone following last week’s bullish breakout above the early June high.  Money Flow measure hovers nearly multi-month high, indicating a positive net demand for the ETF.  This is a bullish development, supporting a rapid advance toward the next level of resistance at the 127.2% Fibonacci extension, near 80.

XLV has support near 76.70. Short-term traders could use that level as the logical level to measure risk against.


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 climbed up to test resistance at the upper boundary of the pink band after recent pullback found support at the lower boundary.  Money Flow measure is flattening from above the zero line indicating less money anticipated this rally.   Additionally, as it was the case of late, a trade above the upper boundary of the pink band often precursor to a pullback consolidation.  With this in mind, we would consider taking down exposure into additional strength, which we think could take the S&P closer to the upper boundary of the pink band, around 2448, before the rally falters.

Short-term trading range: 2418 to 2448.  S&P has minor support near 2418.  Below it a more significant support lies at 2400.  This creates a strong band of support between 2418 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 upper boundary of the pink band, near 2448, represents key price level.  A trade above that level indicates overbought conditions – a situation that often precursor to a meaningful pullback consolidation.

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, while short-term momentum remains positive as S&P inches into the area of key overhead resistance, market internals are pointing toward a fading trend.  As for strategy, traders should consider taking down exposure into short-term strength.


(By:Michelle Mai for Capital Essence)

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