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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Monday January 30, 2017.
We’ve noted in the previous Market Outlook that: “Thursday’s inside bar warned that a short-term correction is brewing in the not too distant future.” As anticipated, S&P closed lower Friday after the disappointed initial fourth-quarter GDP triggered a new round of profit taking efforts. For the day, the bench mark gauge slipped 1.99 points, or 0.09 percent, to 2,294.69. The Dow Jones industrial average fell 7.13 points, or 0.04 percent, to close at 20,093.78. The Nasdaq composite 5.61 points, or 0.1 percent, to 5,660.78. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 0.47 percent to 10.58.
Greif Inc. (GEF) was a notable winner Friday, surged 4.46 percent on strong volume to 59.05 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of GEF suggests that the stock could climb above 66 in the coming days. Just so that you know, initially profiled in our October 26, 2016 “Swing Trader Bulletin” GEF had gained about 25% and remained well position. Below is an update look at a trade in GEF.
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 – Greif Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates GEF as a Buy. The overall technical outlook remains Bullish. Last changed January 23, 2017 from neutral.
Over the past few days, GEF has been basing sideways near the range top as it works off the overbought conditions. Money Flow measure held firmly above the zero line, indicating there was little selling pressure. Friday’s upside breakout had helped clear resistance at the November high, signify resumption of the February-November upswing. So, it seems to us that this rally could carry GEF above 66, based on the 127.2% Fibonacci extension.
Support is around 56. 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”]
Friday’s downside follow-through confirmed Thursday’s bearish reversal signal. Money Flow measure has trending lower but remained above the zero line. So it seems to us that the ongoing consolidation is merely another blip within the multi-month rally. Over the next few days, traders should monitor trading actions near 2280. That level represents a critical tipping point. Pullback that respects 2280 would enhance the bullish outlook.
Short-term trading range: 2280 to 2312. S&P has minor support near 2280. Any pullback toward this area will be met by buyers who missed recent rally. Immediate resistance is around 2300-2312. We’d turn particular bullish if the index close twice above 2300.
Long-term trading range: 2200 to 2300. A close above 2300 on a weekly closing basis signify a bullish breakout with upside target around 2400.
In summary, recent trading action in the S&P suggested strongly that the market is currently in a bullish digestion period, which might last a couple of trading sessions. In a longer term, the overall technical backdrop in term of price structure and momentum still favors the bullish case. So buying on dips remains the most profitable trading strategy.
(By：Michelle Mai for Capital Essence)
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