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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Friday August 12, 2016.
We’ve noted in the previous Market Outlook that: “recent trading actions leaving the market in what looks to us like a back-and-forth consolidation of the late June massive rally. As S&P approached critical tipping point, we’re watching the next buy signal. The index could signal an extended upward trajectory, depending on how it closes over the next few days. If the market is going to find a bottom in the near term, we want to see the S&P rebounds off 2175.” As anticipated, S&P rebounded nicely Thursday, regained all of the prior session losses and some more to close at new record high. Contributed to the overall optimism were sharp gains in oil prices and strong quarterly results from retailers. For the day, the bench mark gauge rose 10.30 points, or 0.47 percent, to close at 2,185.79. The Dow Jones industrial average closed 117.86 points higher, or 0.64 percent, at 18,613.52. The Nasdaq advanced 23.81 points, or 0.46 percent, to end at 5,228.40. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 3.07 percent to 11.68.
Silver Standard Resources Inc. (SSRI) was a notable winner Thursday, soared 11.65% to 15.43 – a fresh 52-week high after reporting better-than-anticipated earnings and revenue for the 2016 second quarter. This is definitely a positive sign going forward. In fact, a closer look at the daily chart of SSRI suggests that the stock could climb up to test key price level near 20 in the coming days. Just so that you know, initially profiled in our August 9, 2016 “Swing Trader Bulletin” SSRI had gained about 14% and remained well position. Below is an update look at a trade in SSRI.
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 – Silver Standard Resources Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates SSRI as a Buy. The overall technical outlook remains bullish. Last changed August 8, 2016 from neutral.
SSRI has been on a tear in recent days after the late July correction tested and respected support at the trend channel moving average (as represents by the white line in the chart). Thursday’s upside breakout had helped clear resistance at the prior high set in early July, signaled resumption of the January upswing with upside target around 20, based on the 50% Fibonacci retracement of the 2011 to 2016 downswing. Resistance stands in the way of continue rally is around 16.20, or the 38.3% Fibonacci retracement.
Support is at around 14. 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”]
As expected, S&P rebounded nicely off support at 2175. In fact, trading action over the past couple of days suggested strongly that traders are committed to taking the index to 2200. Not only that this is a tough rough number, it roughly corresponds with the lower end of the red band, or extreme overbought zone (see chart). Money Flow measure remains positive though still unable to move above the early August peak. This negative divergence indicates a lack of conviction among the bulls. So unless Money Flow measure starts to improve dramatically, the rally might not have the legs to carry on very far and very long.
For now, 2175 represents key support. A close below it would signify a breakdown and a bearish reversal that support further downside follow-through and a test of the important sentiment 2100 mark.
In summary, momentum is clearly with the bulls. Despite the late June massive rally that has jacked up the market by nearly 10%, near-term bias is still in favor of further short-term gain with target of 2200 on the S&P.
(By：Michelle Mai for Capital Essence)
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