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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Monday December 5, 2016.
We’ve noted in the previous Market Outlook that: “S&P will have a downward bias this week, pressured by short-term negative momentum but we expect support at the lower end of the pink band to remains largely intact.” As anticipated, stocks closed mostly flat on Friday as traders repositioned ahead of a key constitutional referendum in Italy. For the day, the S&P added less than a point, or 0.04 percent, to close at 2,191.95. The Dow Jones industrial average closed 21.51 points lower, or 0.11 percent, at 19,170.42. The Nasdaq composite advanced 4.55 points, or 0.09 percent, to end at 5,255.65. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 0.36 percent to 14.12.
Central Garden & Pet Co. (CENT) was a notable winner Friday, soared 10.94% to 31.49 – a fresh 52-week closing high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CENT suggests that the stock could climb up to 38 after the downward trend halted. Just so that you know, initially profiled in our February 13, 2015 “Swing Trader Bulletin” CENT had gained about 260% and remained well position. Below is an update look at a trade in CENT.
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 – Central Garden & Pet Co. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CENT as a Buy. The overall technical outlook remains bullish. Last changed November 7, 2016 from bearish.
After correcting just over 23% from the August peak and meeting anticipated support at the important Fibonacci retracement, CENT rebound has taken the stock above the multi-year high. Over the past few days, CENT has been trending lower in a short-term corrective mode as traders digested the November massive rally. The correction tested and respected support at the early November breakout point. Money Flow measure held firmly above the zero line, there was little selling pressure. Friday’s upside breakout had helped clear resistance at the November high, signify resumption of the January upswing that project to near 38, based on the 161.8% Fibonacci extension.
Support is around 28.30. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Short-term technical outlook remains bullish. Last changed November 14 from neutral (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
S&P basing sideways using the lower end of the pink band as support. The consolidation phase has helped alleviate widespread overbought conditions. Money Flow measure trended higher from below the zero line, indicating selling pressure had eased. These elements suggesting that the probability of a sharp decline is extremely limited.
For the near term, the market has carved out key short-term resistance and support levels for traders to monitor. The lower end of the pink band, around 2190, represents key support. If it closes below 2190, the next leg is likely lower, and we’re looking at 2156, based on the trend channel moving average. This area is too big and too important. It won’t go down without a fight. So, it should not be surprising to see the index correcting higher from that level.
Resistance is around 2200. A close above that level could trigger acceleration toward 2224.
In summary, we wouldn’t look too much into Friday’s trading action because it represents an orderly high-level consolidation period. Support is strong in the 2190 area and downside momentum does not appear strong enough to generate a widespread breakdown. On balance, we remain bullish on the S&P 500 index and looking to buy into market dips.
(By：Michelle Mai for Capital Essence)
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