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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday June 15, 2017.

We’ve noted in the previous Market Outlook that: “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 anticipated, the S&P closed lower Wednesday after the Federal Reserve raised interest rates for the second time this year.  For the day, the bench mark gauge fell 2.43 points, or 0.1 percent, to end at 2,437.92.  The Dow Jones industrial average rose 46.09 points, or 0.22 percent, to close at 21,374.56.  The Nasdaq closed 25.48 points lower, or 0.41 percent, at 6,194.89.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 2.11 percent to 10.64.

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Freshpet Inc. (FRPT) was a notable winner Wednesday, jumped 2.97 percent on strong volume to 15.60.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of FRPT suggests that the stock could climb above 18 in the coming days.  Just so that you know, initially profiled in our March 23, 2017 “Swing Trader BulletinFRPT had gained about 43% and remained well position.  Below is an update look at a trade in FRPT.

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.

Freshpet_20170614

Chart 1.1 – Freshpet Inc. (daily)

Our “U.S. Market Trading Map” rates FRPT as a Buy. The overall technical outlook remains Bullish.  Last changed April 25, 2017 from neutral.  Over the past few days, FRPT has been trending lower in a short-term corrective mode as it worked off the overbought conditions.  The correction found support near the late May breakout point.  Wednesday’s massive reversal bar signified resumption of the May upswing.  Money Flow measure held firmly above the zero line throughout recent correction, indicating there was little selling pressure.  This is a bullish development, supporting further upside follow-through and a test of the 61.8% Fibonacci retracement, just above 18.

FRPT has support near 15.  Short-term traders could use that level as the logical level to measure risk against.

The SPDR S&P Homebuilders ETF (XHB) posted a sixth straight daily gain to close at the highest level in almost two years as the U.S. housing market continues to heat up.  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_20170614

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

Our “U.S. Market Trading Map” painted XHB bars in bright green (strong buy).  Wednesday’s upside follow-through confirmed Tuesday’s bullish breakout above the April high.  Money Flow measure surged to new high, indicating an increase in buying pressure.  This is a bullish development, supporting a rapid advance toward the next level of resistance at the 127.2% Fibonacci extension, near 40.50.

XHB has support near 38.40. Short-term traders could use that level as the logical level to measure risk against.

Sp500_CEM_20170614

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 retreated after recent rally attempt found resistance at the early June high, just above 2440.  Money Flow measure is on a verge of turning negative.  This is a short-term bearish development, suggesting markets are opened to range-bound trading in the next few days.  Nonetheless, if S&P could hold above 2420 this week then a move above 2440 would be easier to achieve.

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, S&P’s quick run is showing some signs of exhaustion, noting a struggle for the index to get far past the early June high.  The longer the index stay below that level, the more vulnerable it is to lower prices.

 

(By:Michelle Mai for Capital Essence)

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