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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Monday September 19, 2016.
We’ve noted in the previous Market Outlook that: “Thursday’s rebound did not improve the posture of our medium-term indicators, which remain supportive of deeper pullback. S&P has confirmed a breakdown below the trend channel moving average in a reflection of weak short-term momentum. The longer the index stay below that level, the more vulnerable it is to lower prices.” As anticipated, stocks closed lower on Friday as traders digested key inflation data and positioned ahead of Federal Reserve meeting.
For the day, the bench mark gauge dropped 8.1 points, or 0.38 percent, to close at 2,139.16. The Dow Jones industrial average fell 88.68 points, or 0.49 percent, to end at 18,123. The Nasdaq slipped 5.12 points, or 0.1 percent, to 5,244.57. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 5.71 percent to 15.37.
Abiomed Inc (ABMD) was a notable winner Friday, rose 1.43% on strong volume to 124.93 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of ABMD suggests that the stock could climb up to test key price level near 140 in the coming days. Just so that you know, initially profiled in our May 17, 2016 “Swing Trader Bulletin” ABMD had gained about 30% and remained well position. Below is an update look at a trade in ABMD.
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 – Abiomed Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates ABMD as a Buy. The overall technical outlook shifted to bullish. Last changed September 16, 2016 from neutral.
ABMD has been on a tear in recent days after the August correction found support near the bottom of its short-term trading range. Friday’s upside follow-through served as a confirmation and extension to Thursday’s bullish breakout above the August falling trend line. This is a bullish development, supporting further upside follow-through and a test of key technical resistance near 140, based on the 127.2% Fibonacci extension.
Support is at the trend channel moving average, around 119. 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 neutral. Last changed September 13 from bullish (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
S&P retreated after recent rally attempt ran out of steam just below 2150, which was the lower end of the summer trading range. The index broke below that level on September 9, then reversed the next day, retested it. The index is now developing a new trading range below that level. This is a bearish development, showing that buying enthusiasm had really been lost and that market is vulnerable to lower prices. Perhaps the negative Money Flow measure is the best illustration for the bears’ case.
For now, the dark-green band, around 2120-2100, represents key support. A failure to hold above 2100 will trigger another selloff with downside target around 2050.
In summary, S&P has confirmed a breakdown below key support in a reflection of weak short-term momentum. While more backing and filling between 2150 and 2120 is expected, a brief dip below this level would not be a surprise.
(By：Michelle Mai for Capital Essence)
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