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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday November 15, 2016.
We’ve noted in the previous Market Outlook that: “S&P has confirmed a breakout above its trend channel moving average last week. Short-term momentum is strong but overbought conditions minimized immediate upside follow-through. Our near-term technical bias is that S&P could see some short-term weakness, but will ultimately push itself higher.” As anticipated, S&P traded higher in early Monday session before sellers stepped in and pushed prices lower. Contributed to the overall pessimism was weakness in the large-cap tech stocks. For the day, the bench mark gauge closed 0.25 points lower, or 0.01 percent, at 2,164.20. The Dow Jones industrial average rose 21.03 points, or 0.11 percent, to close at 18,868.69. The Nasdaq composite fell 18.72 points, or 0.36 percent, closing at 5,218.4. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 2.19 percent to 14.48.
Garmin Ltd. (GRMN) was a notable winner Monday, soared 4.58 percent on strong volume to 52.24. This is bullish from a technical perspective. In fact, a closer look at the daily chart of GRMN suggests that the stock could climb up above 62 in the coming days. Just so that you know, initially profiled in our November 11, 2016 “Swing Trader Bulletin” GRMN had gained more than 5% and remained well position. Below is an update look at a trade in GRMN.
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 – Garmin Ltd. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates GRMN as a Buy. The overall technical outlook remains bullish. Last changed November 9, 2016 from neutral.
GRMN has been on a tear in recent days after the late October correction retested and respected support at the bottom of its short-term trading range. That level roughly corresponds with the prior low set in September and the 38.2% Fibonacci retracement of the January-August upswing. Money Flow measure trended higher from above the zero line, indicating an increase in buying pressure. Monday’s upside breakout had helped clear resistance at the August falling trend line, signify a bullish breakout that support a rapid advance above the August high of 55.59 and up to the 127.2% Fibonacci extension near 62.60.
Support is around 48.70. 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 shifted to 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 near the lower end of the pink band, reaffirming last week’s upside breakout above its trend channel moving average. The fact that the index managed to hold on to all of the gains in the face of extreme overbought conditions indicated an internal strength. This is a bullish development, suggesting that S&P could break to new highs as soon as it works off the excessive optimism.
Traders however, must be mindful that Money Flow measure trended lower from below the zero line, indicating a negative net demand for stocks. so, we’d be cautious against taking large position at this stage.
Near-term, the index had carved out key support and resistance for traders to monitor. For now, 2183 represents key resistance. Above it, a more significant resistance lies at the August high near 2194. This creates a strong band of resistance between 2183 and 2194. A close above 2194 will trigger acceleration toward the range top, currently at 2211.
Support is at the trend channel moving average, currently at 2145. If S&P closes below that level, it’s bearish. Technically speaking, when key support breaks, it usually begets more selling. The next downside level to watch is 2080.
In summary, S&P shifted to consolidation mode as traders digested the election massive rally. The fact that the index managed to hold on to all of the gains in the face of extreme overbought conditions indicated an internal strength. As for strategy, pullback will present a buying opportunity, while selling into strength may not be the best strategy in a market considered likely to bounce back.
(By：Michelle Mai for Capital Essence)
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