S&P’s 4200 Continues To Act As Price Magnet

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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Wednesday April 14, 2021.

We’ve noted in the previous Market Outlook that: “S&P could continue to drift higher amid the positive earning influences.  So, it seems to us that the overbought conditions can be sustained for a few days, potentially allowing for a test of 4200 before a significant pullback unfolds.”  As anticipated, S&P closed at record highs on Tuesday, added 0.33% to finish at 4,141.59, shrugging off a vaccine setback as reopening stocks cut some losses and tech rallied ahead of the start of quarterly earnings season.  The Nasdaq Composite rose 1.05 percent to 13,996.10.  The Dow Jones Industrial Average fell 0.2 percent to 33,677.27.  The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell nearly 2 percent to 16.63.

Weaker guidance from American Airlines (AAL) soured the sentiment on the broader sector somewhat as the airline forecast wider-than-expected losses for Q1.  As such, the U.S. Global Jets ETF (JETS) added 0.1 percent on the day and is up nearly 20 percent YTD, outperformed the S&P.  Now the question is what’s next?  Below is an update look at a trade in JETS.

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 – U.S. Global Jets ETF (weekly)

Our “U.S. Market Trading Map” painted JETS bars in red (sell) – see area ‘A’ in the chart. Over the past few weeks, JETS has been trending lower in a short-term corrective mode after the February rally ran out of steam near the early 2020 bearish breakaway gap.  The March correction is testing support at the 2020 rising trend line, just above . That level is significant in charting terms.  A failure to hold above it signifies a bearish reversal and a retest of the more important support near the 23 zone, or the 50% Fibonacci retracement, should be expected.

JETS has resistance near 29.  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 remains bullish (buy).  Last changed March 26, 2021 from bearish (sell) – (see area ‘A’ in the chart).

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

The big picture remains the same. The S&P continues drifting higher using the lower boundary of the red band as support.  Money Flow measure is registering a weak bullish signal.  The indicator printed a lower high as prices ascending, suggesting less and less money is chasing the rally.  Adding to concerns is the return of overbought conditions on a daily basis.  These elements will give the bulls more pressures than they have already had.  While more backing and filling would not be a surprise, if the S&P could hold above the lower boundary of the red band, around 4100, then a move above 4200 would be easier to achieve.

Short-term trading range: 4100 to 4200.  S&P has support around 4100.  A failure to hold above that level has measured move to around 4070.  Resistance is around 4170.  A sustain advance above that level has measured move to 4200.

Long-term trading range: 3550 to 4500.  S&P has support near 3900.  A failure to hold above that level has measured move to 3550.  The index has resistance near 4200.  A close above that level has measured move to 4500.

In summary, although overbought condition is keeping buyers at bay, S&P’s 4200 continues to act as price magnet.  Short-term traders can anticipate increase short-term volatility with rapid up and down moves in the market.


Thanks and happy trading.

(By:Michelle Mai for Capital Essence)

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