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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday August 1, 2017.

We’ve noted in the previous Market Outlook that: “last week’s high made a bearish divergence as price made a higher high and Money Flow measure a lower low.  This is a negative development, increasing the likelihood of downside follow-through in the days ahead.”  As anticipated, the S&P closed lower Monday, down 0.07 percent to close at 2,470.30 amid weakness in the large-cap tech stocks.  The Nasdaq composite fell 0.42 percent to end at 6,348.12.  The Dow Jones industrial average outperformed, rose 60.81 points to close at 21,891.12.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 0.29% to close at 10.26.

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Terex Corp (TEX) broke out to new 52-week high Monday, up 1.76 percent to close at 39.37.  This is bullish from a technical perspective.  In fact, a closer look at the weekly chart of TEX suggests that the stock has embarked on a rally that should test 45 at minimum.  Just so that you know, initially profiled in our June 26, 2017 “Swing Trader BulletinTEX had gained about 12% and remained well position.  Below is an update look at a trade in TEX.

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 – Terex Corp. (daily)

Our “U.S. Market Trading Map” rates TEX as a Buy. The overall technical outlook remains Bullish.  Last changed May 2017 from neutral. Over the past few days, TEX has been basing sideways near the range top as it worked off overbought conditions.  Monday’s rally had helped clear resistance at the early July high, hence confirmed the early July broke out.  Money Flow measure held firmly above the zero line since the stock reached an interim low in March, indicating there was little selling interest.  This is a positive development, supporting further upside follow-through and a retest of the 2014 high, just above 45

TEX has support near 38.  Short-term traders could use that level as the logical level to measure risk against.

After a strong run of outperformance since the U.S. election in November that saw the iShares PHLX Semiconductor ETF (SOXX) rallied over 40 percent at its June high, the ETF has been trending lower over the past weeks as traders wondered more gains are warranted given the massive advance over the past months.  Below is an update look at a trade in SOXX.

Chart 1.2 – iShares PHLX Semiconductor ETF (daily)

Our “U.S. Market Trading Map” painted SOXX bars in yellow (neutral).  After printed a fresh 52-week high in early June, SOXX rolled over.  The June correction found support at the 2016 rising trend line.  The July oversold bounce ran out of steam near the June breakdown point.  Monday’s downside follow-through confirmed last week’s bearish reversal signal and bring the 2016 rising trend line support, around 142, into view.  A close below that level will break the 2016 bullish uptrend and has measured move down to 136-125, based on the 23.6% and 38.2% Fibonacci retracement.

SOXX has resistance near 151. 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 July 12, 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”]

Once again, the S&P moved up to test resistance at the lower boundary of the red band after recent pullback found support near the lower boundary of the pink band.  Monday’s weak close suggested that most of the potential buyers at this level had already placed their bets.  The next batch of buyers typically sits at a much lower level.  Perhaps the negative Money Flow measure is the best illustration of the bears’ case.

Short-term trading range: 2460 to 2483.  S&P has minor support near 2460.  A close below 2460 has measured move down 2437, based on the trend channel moving average.  The lower boundary of the red band, around 2483, represents key price level.  A close above that level often marked short-term market tops.  Traders should put it on the trading radar.

Long-term trading range: 2400 to 2500.  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, short-term momentums are deteriorating as traders are watching to see whether or not the S&P can hold 2460.  A failure to hold above key price level means that long-term buying pressure has finally been exhausted.  On balance, we remain near term neutral/negative for S&P as we believe market vulnerable to some downside retracement over the short-to-intermediate term.

 

(By:Michelle Mai for Capital Essence)

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