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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday October 20, 2016.
We’ve noted in the previous Market Outlook that: “based upon recent trading actions, the S&P is in a process of establishing a W-shape bottom pattern.” As anticipated, stocks closed mostly higher on Wednesday amid a fresh batch of better-than-expected earnings and rising oil prices. For the day, the S&P rose 4.69 points, or 0.22 percent, to end at 2,144.29. The Dow Jones industrial average rose 40.68 points, or 0.22 percent, to close at 18,202.62. The Nasdaq rose 2.58 points, or 0.05 percent, to close at 5,246.41. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 5.69 percent to 14.41.
Halliburton Company (HAL) was a notable winner Wednesday, Jumped 4.25 percent to 49.07 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of HAL suggests that the stock could climb above 54 in the coming days. Just so that you know, initially profiled in our May 12, 2016 “Swing Trader Bulletin” HAL had gained about 25% and remained well position. Below is an update look at a trade in HAL.
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 – Halliburton Company. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates HAL as a Buy. The overall technical outlook remains bullish. Last changed September 30, 2016 from neutral.
Over the past few days, HAL has been basing sideways near the range top as it worked off overbought conditions. Money Flow measure held firmly above the zero line since the stock reached an interim low in late September, indicating there was little selling interest. Wednesday’s breakout had helped clear resistance at the early October high, signify a bullish breakout. This is a bullish development, supporting further upside follow-through and a test of key technical resistance near the 54.50 zone, based on the 61.8% Fibonacci retracement of the 2014-2016 downswing.
Support is around 48. 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 neutral. Last changed October 11 from bullish (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
Wednesday’s upside follow-through served as a confirmation and extension to Tuesday’s bullish breakout signal. This is a bullish development, supporting further upside follow-though. However, let’s notice that while Money Flow measure trended higher, the indicator still below the zero line, suggesting the overbought sell signal will unfold by the end of the week. With this in mind, we would consider taking down exposure into additional strength, which we think could take the S&P closer to the trend channel moving average, around 2161, before the rally falters.
As for support, 2126-2114 represents a major support. This support needs to hold on a daily closing basis, according to our work, in order to prevent a test of secondary support at the June low near 2000.
In summary, while short-term momentum remains positive as S&P inches into the area of key overhead resistance, market internals are pointing toward a fading trend. The trend channel moving average marks the inflection point. A sustain break above that level is required before there is any real prospect of a change in an intermediate-term downtrend.
(By：Michelle Mai for Capital Essence)
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