Momentum Deteriorated as S&P Tested Key Level

several key indicators are deteriorating as traders are watching the S&P tested ‘support turns resistance’. A failure to climb above key price level means that most of the potential buyers at this level had already placed their bets. 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

S&P Testing Support Turned Resistance

this week recovery rally is testing ‘support turns resistance’ near S&P’s 2470. The longer the index stay below that level, the more vulnerable it is to lower prices

S&P Near-term Buying Pressure Has Been Exhausted

S&P broke key support last week. When strong support is broken it means that near-term buying pressure has finally been exhausted. A deeper pullback would be constructive in that it would generate oversold conditions within the framework of the long-term uptrend. While there seems to be room to go lower, we expect support at the important sentiment 2400 mark to remain largely intact

S&P Selloff Overextended But Rebound Should Be Short-lived

Thursday’s bearish breakdown signify an imminent major trend shift. While there seems to be room to go lower, the selloff is overextended from a short-term perspective so it’ll be important to monitor the retreat and rebound behaviors over the next few days to determine whether breakdowns are decisive

Downside Momentum Not Strong Enough to Generate Decisive Breakdown

after the July massive rally, stocks digested their gains in a consolidation phase that is giving way to a pullback in the S&P. Support is strong in the 2460 area and downside momentum does not appear strong enough to generate a decisive breakdown. As for strategy, traders should consider buying into market dips

S&P Established Important Near-term High

Tuesday’s bearish topping tail candlestick together with the lagging Money Flow measure suggested that an important near-term high has been established and the S&P is entering a much needed pause. This increases the probability that the late day sell-off will momentum but a much deeper slide is needed to erase the short-term upward trajectory

Late July’s Outside Reversal Bar indicated Possible Trend Break

although the S&P remained confined to a range bounce trading pattern, the late July’s outside reversal bar indicated a possible trend break. Traders should monitor any drops below 2460. If that support gives way, a drop to the 2440-2400 zone is certainly possible

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