S&P Setup For Retest Of August Low

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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday September 10, 2015.

We’ve noted in the previous Market Outlook that: “rallies could be short-lived because higher prices will likely attract more sellers.  So, traders should consider selling into counter-trend bounces.”   As anticipated, stocks opened sharply higher following strong gains in markets overseas.  The market however, gave back all of the early gains and some more to close more than 1 percent lower Wednesday, weighed by declines in oil prices.  For the day, the Dow Jones Industrial Average closed down 239.11 points, or 1.45 percent, at 16,253.57.  The S&P 500 closed down 27.37 points, or 1.39 percent, at 1,942.04.  The Nasdaq closed down 55.4 points, or 1.15 percent, at 4,756.53. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 5.34% to 26.23.


Notably, H&E Equipment Services Inc. (HEES) bucked the overall trend, jumped 4.27% to 20.74.  This is bullish from a technical perspective.  In fact, a closer look at the daily chart of HEES suggests that the stock could climb above 27 after the downward trend halted.  Just so that you know, initially profiled in our September 8, 2015 “Swing Trader BulletinHEES had gained more than 10% and remained well position.

The graphics below are from our “U.S. Market ETF Trading Map”, show the near-term technical bias and trading ranges for HEES and the S&P 500 index.  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 – H&E Equipment Services Inc. (daily)

As indicated in the above chart, our “U.S. Market ETF Trading Map” rates HEES as a Buy.   Wednesday upside follow served as a confirmation and extension to Tuesday bullish breakout above the late August falling trend line, signals resumption of the multi-month upswing.

Money Flow measure held firmly above the zero line since the stock reached an interim low in late July 2015, indicating there was little selling interest.  This is bullish and should continue to provide foundation for further advance.  So, it seems to us that this rally could carry HEES up to the April 2015 high of 27.48.  Resistance stands in the way of continue rally is at late August high of 20.85f.

Support is at last week pivot low, just above 18.  Only a close below that level can wreck the near-term bullish outlook.

Chart 1.2 – S&P 500 index (daily)

As indicated in the above chart, our “U.S. Market ETF Trading Map” rates the S&P as a Sell.  The index sold off after the early rally attempt was met with a new wave of selling interest.  Money Flow measure trended lower from below the zero line, indicating an increase in selling pressure.  This is bearish and suggested that the index will eventually break through the green band and continue down to around the August low of 1867.

Near-term, the market had carved out key support and resistance for traders to monitor.  The lower edge of the green band, currently at 1913, represents key support.  A close below that level could trigger another massive selloff and a retest of the August low should be expected.

For now, the important sentiment 2000 market represents key resistance.  Some aggressive traders might use 2000 like a magnet to sell against.  Above it, a significant resistance lies at the trend channel moving average, currently at 2052.

In summary, so far the up-leg that started from August low on the S&P has proved nothing as far as its staying power or as a possible new upswing.  Additionally, with Money Flow measure below the zero line, higher prices would attract more sellers.  In a short-term, we see the potential for the S&P to decline to 1867 at minimum.

(By:Michelle Mai for Capital Essence)

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