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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday June 16, 2017.

We’ve noted in the previous Market Outlook that: “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.”  As anticipated, the S&P closed lower Thursday amid weakness in the tech sector.  For the day, the S&P slipped 5.46 points, or 0.22 percent, to end at 2,432.46.  The Dow Jones industrial average fell 14.66 points, or 0.07 percent to close at 21,359.90.  The Nasdaq pulled back 29.39 points, or 0.47 percent, to close at 6,165.50.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 2.44 percent to 10.90.

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Weight Watchers International Inc. (WTW) was a notable winner Wednesday, surged 6.27 percent on strong volume to 28.80 – a fresh 52-week high.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of WTW suggests that the stock could climb above 36 in the coming days.  Just so that you know, initially profiled in our April 7, 2017 “Swing Trader BulletinWTW had gained about 82% and remained well position.  Below is an update look at a trade in WTW.

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.

WeightWatchers_20170615

Chart 1.1 – Weight Watchers International Inc. (daily)

Our “U.S. Market Trading Map” rates WTW as a Buy. The overall technical outlook remains Bullish.  Last changed March 27, 2017 from neutral.  Over the past few days, WTW has been basing sideways as traders digested the March-May massive rally. Thursday’s rally had pushed the stock above the early June high, signified a bullish breakout.  Money Flow measure held firmly above the zero line since the stock reached an interim low in late 2016, indicating there was little selling pressure.  This is a bullish development, supporting further upside follow-through and a test of the 261.8% Fibonacci extension, just above 36.

WTW has support near 26.50.  Short-term traders could use that level as the logical level to measure risk against.

It’s important to note that utilities remains resilient with the Utilities Select Sector SPDR ETF (XLU) closed at record high Thursday.  XLU outperformed the boarder market, up 11.80 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 XLU.

UtilitiesETF_20170615

Chart 1.2 – Utilities Select Sector SPDR ETF (weekly)

Our “U.S. Market Trading Map” painted XHB bars in bright green (strong buy).  Over the past few weeks, XLU is basing sideways near support at the prior high set last summer as it works off overbought conditions.  Money Flow measure held firmly above the zero line since the ETF reached an interim low in 2015, indicating there was little selling pressure.  This is a bullish development, supporting a rapid advance toward the next level of resistance at the 127.2% Fibonacci extension, just above 56.

XLU has support near 53. Short-term traders could use that level as the logical level to measure risk against.

Sp500_CEM_20170615

Chart 1.3   – S&P 500 index (daily)

Short-term technical outlook shifted to neutral.  Last changed June 15, 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 moved down to test support at the lower boundary of the pink band after recent rally found resistance at the early June high, just above 2440.  Money Flow measure hovers near the zero line, indicating a lack of commitment.  This is a short-term negative 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 2440.  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 2440, 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, based upon recent trading actions, the S&P is in a midst of a short-term pullback consolidation phase.  However, the return of short-term oversold condition could help minimize downside follow-through and widespread breakdowns.

 

(By:Michelle Mai for Capital Essence)

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