Editor’s note: this column was originally published on Capital Essence’s CEM News. It’s being republished as a bonus for the loyal readers. For more information about subscribing to CEM News, please click here.
Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday June 16, 2016.
We’ve noted in the previous Market Outlook that: “market is setting up for a relief bounce, but given the damages done over the past few days, rally would be short-lived.” As anticipated, stocks traded higher in early Wednesday session that saw the S&P reached as high as 2,085.65 before sellers stepped in and pushed prices lower. Contributed to the overall weakness were growing concerns over the UK leaving the European Union and anxiety about the timing of next rate hike.
For the day, the Dow Jones industrial average closed down 34.65 points, or 0.20 percent, at 17,640.17. The S&P 500 closed down 3.82 points, or 0.18 percent, at 2,071.50. The Nasdaq composite closed down 8.62 points, or 0.18 percent, at 4,834.93. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 1.76 percent to 20.14.
Hecla Mining Co (HL) was a notable winner Wednesday, surged 5.32% on strong volume to 4.55. This is bullish from a technical perspective. In fact, a closer look at the daily chart of HL suggests that the stock could climb above 5.60 after the downward trend halted. Just so that you know, initially profiled in our May 26, 2016 “Swing Trader Bulletin” HL had gained about 12% and remained well position. Below is an update look at a trade in HL.
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 – Hecla Mining Co. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates HL as a Buy. The overall technical outlook remains bullish. Last changed January 26, 2016 from bearish.
Over the past few days, HL has been trending lower in a short-term corrective mode as it worked off the overbought condition. The correction found support near the trend channel moving average (as represents by the white line in the chart). Wednesday’s bullish breakout had helped clear resistance at the early June falling trend line, signaled resumption of the January upswing that projects to 5.60, or the 127.2% Fibonacci extension. Resistance stands in the way of continue rally is at the early June high of 4.75.
Support is around 4.17. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Near-term technical outlook remains bearish. Last changed June 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 rolled over after the early rally attempt ran out of steam near the broken-support-turned-resistance at the 2085 zone. As result, the index closed below its trend channel moving average after breaking above that level in late May. The fact that the bulls failed to mount a meaningful oversold bounce is indicative that they are losing control of the market. This is a negative development, suggesting that S&P might have to move to a much lower level to attract new buyers. Perhaps the negative Money Flow measure is the best illustration of the bear’s case.
For the near-term, market had carved out key technical resistance and support for traders to monitor. For now, 2085 represents key price level. In order to build a sustain rally, the S&P must hurdle and sustain above that level. With that said, a sustain breakout above 2085 will support upside follow-through and a test of the more significant resistance in the 2100 area.
Immediate support is around 2064. A failure to hold above that level could trigger a large-scale selloff with downside target of 2033, which we’ve determined using the bottom of its short-term trading range.
In summary, S&P’s in grave danger of breaking down. Nonetheless, downside risk could be limited by oversold conditions. Our indicators suggested strongly that market remains in flux and without clear direction. We’re expecting further whipsaws and intimidating times ahead.
(By：Michelle Mai for Capital Essence)
© All rights reserved and actively enforced.
Note: This is a free edition of The Market Outlook, a daily CEM News subscriber newsletter. To get this column before market opens together with hundreds of technical trading ideas (including stocks and ETFs) every month, please click here.
Subscribe to CEM News to receive more in-depth research from Capital Essence.
