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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday January 13, 2017.
We’ve noted in the previous Market Outlook that: “based upon recent trading actions, the S&P is in a midst of a short-term consolidation phase.” As anticipated, stocks closed lower Thursday after President-elect Donald Trump disappointed investors during his first news conference. For the day, the S&P fell 4.88 points, or 0.21 percent, to 2,270.44. The Dow Jones industrial average dropped 63.28 points, or 0.32 percent, to close at 19,891. The Nasdaq composite dropped 16.16 points, or 0.29 percent, to end at 5,547.49. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 2.49 percent to 11.54.
CSX Corp (CSX) was a notable winner Thursday, rose 0.89% to 38.38 – a fresh 52-week closing high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CSX suggests that the stock could climb up to test key technical level near 42 in the coming days. Just so that you know, initially profiled in our March 1, 2015 “Swing Trader Bulletin” CSX had gained about 59% and remained well position. Below is an update look at a trade in CSX.
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 – CSX Corp. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CSX as a Buy. The overall technical outlook remains Bullish. Last changed November 8, 2016 from neutral.
CSX has been on a tear in recent days after the December correction found support at the late November breakout point. Thursday’s upside follow-through confirmed Wednesday’s bullish breakout, signify resumption of the January upswing. Money Flow measure held firmly above the zero line throughout the correction, indicating there was little selling pressure. This is a bullish development, supporting further upside follow-through and a test of the 127/2% Fibonacci extension, near 42.
Support is around 36. 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”]
S&P penetrated the lower limit of its short-term trading range. In accordance to the Japanese candlestick pattern recognition, Thursday bullish long tail is a clear indication of demand overwhelming supply. This is bullish and suggested that Thursday late-day recovery rally might have some legs. So, traders should expect at least an attempt to rally Friday.
Short-term trading range: 2260 to 2280. S&P has minor support near 2260. If the November rally were to continue, the index must hold and bounce off that level. A failure to hold above 2260, meanwhile, will bring the trend channel moving average, just above 2200, into view. For now, 2280 represents key price level. If we get a daily close above that, there’s another chance to test of the more significant resistance in the 2300 area.
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 but for now it looks firm.
In summary, S&P appeared to get some support near the lower edge of the pink band, which we’ve determined using our proprietary trading system. That level is significant in charting terms, many times over the past couple of weeks, pullback to that level was met with a new wave of aggressive buying that propel the index to new highs. Near-term however, market remains in flux and without clear direction. Traders should expect further whipsaws and intimidating times ahead.
(By：Michelle Mai for Capital Essence)
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