Editor’s note: this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.

 

Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday June 15, 2018.

Stocks closed mix Thursday as strength in tech stocks had helped offset weakness in financials.  For the day, the Dow Jones Industrial Average fell 0.1% to 25,175.31. The S&P advanced 0.3% to 2,782.49.  The Nasdaq Composite Index gained 0.9% to 7,761.04.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 6.30 percent to close at 12.11.

CEMNews_trial

One of the noteworthy developments in recent days has been the move in tech stocks.  A rally in technology stocks driving the Nasdaq to record high.  The Technology Select Sector SPDR ETF (XLK) rose 0.71 percent to 72.25, bringing its YTD gains up to 13 percent, outperformed the S&P by a wide margin.  Now the question is whether the rally has more legs?  Below is an update look at a trade in XLK.

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 – Technology Select Sector SPDR ETF (weekly)

Our “U.S. Market Trading Map” painted XLK bars in green (buy) – see area ‘A’ in the chart. XLK has been on a tear in recent weeks after the early 2018 selloff found support near the 23.6% Fibonacci retracement of the 2016-2018 upswing. This week’s upside follow-through confirmed last week’s bullish breakout above the early 2018 high.  This is a positive development, setting the stage for a rapid advance toward the next level of resistance at the 127.2% Fibonacci extension, near 80.

XLK has support near 71.  Short-term traders could use that level as the logical level to measure risk against.

Chart 1.2   – S&P 500 index (daily)

Short-term technical outlook shifted to bullish.  Last changed June 14, 2018 from slightly bearish (see area ‘A’ in the chart).

[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]

S&P continues basing sideways after the late May rally out of steam near the massive 2-conjoining resistance, the February-March recoveries high and the lower boundary of the red band, near the important sentiment 2800 mark.  Momentum indicator whipsaws near overbought zone.  In fact, trading actions over the past few days represented an orderly high-level consolidation period.  This is a bullish development, suggested that the path with least resistance is still significantly higher here.  Perhaps, the positive Money Flow measure is the best illustration of the bulls’ case.

Short-term trading range: 2740 to 2800.  S&P has minor support near 2740.  A close below that level has measured move to 2700.  The index has resistance near 2800-2814, based on the late February and early March highs and the upper boundary of its short-term trading range.  The market had historically developed important near-term top around that level.

Long-term trading range: 2500 to 2870.  S&P has key support near 2600.  A close below that level will trigger a major sell signal with downside target near 2500. But it’s not expected this week.  The index has resistance just above 2700.  A sustain advance above that level could trigger acceleration toward the early 2018 highs but for now it looks firm.

In summary, several key technical indicators suggest that S&P is in a midst of a short-term consolidation phase.   The fact that the index managed to hold on to most of recent gain despite overbought conditions, indicating an internal strength.  This increases the probability that the S&P will break out from current trading range as soon as the market shakes off the excessive bullishness.

Thanks and happy trading.

 

(By:Michelle Mai for Capital Essence)

© All rights reserved and actively enforced.
Note: This is a free edition of The Market Outlook, a daily CEM News subscriber newsletter. To get this column before market opens together with hundreds of technical trading ideas (including stocks and ETFs) every month, please click here.
Subscribe to CEM News to receive more in-depth research from Capital Essence.

Archives

Translate this Page

© 2004-2016 Capital Essence's Investment Blog- 錢途集團 Power by: Capital Essence