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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday July 14, 2016.
We’ve noted in the previous Market Outlook that: “S&P is in overbought territory following recent advance. While overbought condition is normal during long-term uptrend, it suggests that upside momentum might not sustain without at least a short-term breather.” As anticipated, S&P closed near the flatline Wednesday but managed to eke further into record territory earlier, rising less than a point to 2,152.43. The Nasdaq was lower, off 17 at 5,005. The Dow up 24 points at a new record close of 18,372. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 3.76 percent to 13.04.
Hecla Mining Co (HL) was a notable winner Wednesday, soared 7.22% to 6.24 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of HL suggests that the stock is in upswing that projects to 6.70 at minimum but has an overshoot target over 10. Just so that you know, initially profiled in our May 26, 2016 “Swing Trader Bulletin” HL had gained about 53% 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 traders digested the June massive run. Wednesday’s bullish breakout had helped clear resistance at the prior high, signaled resumption of the January-June upswing. Money Flow measure held above the zero line since the stock reached an interim low in January, indicating there was little selling pressure. This is a bullish development, supporting further upside follow-through and a test of the more important resistance in the 10 area, based on the 216.8% Fibonacci extension. Resistance stands in the way of continue rally is at the 161.8% Fibonacci extension, around 6.70.
Support is around 5.50. 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 bullish. Last changed June 29 from bearish (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 red band as support. As mentioned, a trade into the red band indicated extreme overbought conditions, which often precursor to a pullback consolidation.
Near-term, the index had carved out key support and resistance for traders to monitor. Major resistance lies at the range top, currently at 2173. Technically speaking, a trade above that level often marked significant market tops so traders should keep this on the trading radar.
For now, the lower end of the red band, currently at 2143, represents key support. A failure to hold above that level would signify a bearish reversal, supporting downside follow-through and a test of support in the 2130 zone in the days ahead.
In summary, S&P shifted to consolidation mode as traders digested the late June massive run. 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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