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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday August 3, 2017.

We’ve noticed in the previous Market Outlook that: “we wouldn’t look too much into recent trading action as because it keeps the S&P within its short-term consolidation phase. Resistance is strong in the 2483 zone and upside momentum does not appear strong enough to generate a decisive breakout.”  As anticipated, stocks traded higher in early Wednesday session that saw the S&P traded as high as 2,480.38 before sellers stepped in and pushed prices off the intraday high.  For the day, the bench mark gauge added just 1.22 points to close at 2,477.57.  The Nasdaq composite closed flat at 6,362.65 while the Dow Jones industrial average rose 52.32 points to close at 22,16.24.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 1.88% to close at 10.28.

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Air Transport Services Group Inc. (ATSG) surged to new 52-week high Wednesday, up 4.43%.  In fact, a closer look at the daily chart of ATSG suggests that the stock has embarked on a rally that should test 26.80 at minimum but has overshoot target above 30.  Just so that you know, initially profiled in our July 20, 2017 “Swing Trader BulletinATSG had gained about 10% and remained well position.  Below is an update look at a trade in ATSG.

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 – Air Transport Services Group Inc. (daily)

Our “U.S. Market Trading Map” rates ATSG as a Buy. The overall technical outlook remains Bullish.  Last changed July 25, 2017 from neutral. Over the past few days, ATSG has been basing sideways near the range top.  This is a bullish development, represented an orderly high-level consolidation period atop of the late July breakout.  Wednesday’s rally pushed the stock above the July high, signified a bullish breakout.  Money Flow measure held firmly above the zero line throughout recent correction, indicating there was little selling interest.  This is a positive development, supporting further upside follow-through and a test of the 127.2% Fibonacci extension, around 26.80.  A sustain advance above that level has measured move to 30, based on the 161.8% Fibonacci extension.

ATSG has support near 24.  Short-term traders could use that level as the logical level to measure risk against.

After posting a massive gain of 19.5% for the month of July, Global X Copper Miners ETF (COPX) continuing its impressive near-term upward movement, up 1.57% so far this week. Now the question is whether the rally has more legs?  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 SPHB.

Chart 1.2 – Global X Copper Miners ETF (weekly)

Our “U.S. Market Trading Map” painted COPX bars in bright green (strong buy).  There is a distinct possibility that the ETF is building the right hand side of the bullish inverse Head-Shoulder pattern.  The neckline, around 25, represents key level. A sustain advance above it signify a bullish breakout with upside target around 43, which we’ve determined using the height of the pattern and projected it upward.

Money Flow measure however, still holds below the zero line, indicating a negative net demand so we’d be cautious against taking large position at this stage.

COPX has support near 21.50. 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”]

Not much has been changed since last update.  S&P continues bouncing back and forth within a confines of the pink band. In accordance to the Japanese candlestick pattern recognition, last Thursday’s outside reversal bar was a clear indication of supply overwhelming demand.  This is a bearish development, increased the likelihood of downside follow-through as soon as the market works off the excessive bearishness.

While seemingly vulnerable to further short-term weakness, Money Flow measure still above the zero line, indicating a positive net demand for stocks.  This is a positive development, suggesting that downside risk is likely to be limited.  So, buying into short-term weakness remains the most profitable strategy.

Short-term trading range: 2460 to 2484.  S&P has support near 2460.  A close below 2460 will break the consolidator pattern and has measured move down 2440-2400.  The lower boundary of the red band, around 2484, 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, trading actions over the past few days represented an orderly high-level consolidation period in the aftermath of last Thursday’s massive reversal.  S&P will have a downward bias toward the end of the week but we expect support at the lower boundary of the pink band to remains largely intact.

 

(By:Michelle Mai for Capital Essence)

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