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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Wednesday December 7, 2016.
We’ve noted in the previous Market Outlook that: “our indicators suggested that the S&P had found solid footing near 2190. We view Monday’s bullish reversal as a positive technical catalyst that could allow for a stronger finish this week.” As anticipated, stocks registered a third consecutive advance on Tuesday with the S&P gained 7.52 points, or 0.34 percent, to close at 2,212. The Dow Jones industrial average closed 35.54 points higher, or 0.18 percent, at 19,251.78. The Nasdaq composite advanced 24.11 points, or 0.45 percent, to end at 5,333. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 2.88 percent to 11.79.
Federal Agricultural Mortgage Corp. (AGM) was a notable winner Tuesday, jumped 2.85% to 55.52 – a fresh 52-week closing high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of AGM suggests that the stock could climb up to test key price level near 60 in the coming days. Just so that you know, initially profiled in our February 11, 2016 “Swing Trader Bulletin” AGM had gained about 83% and remained well position. Below is an update look at a trade in AGM.
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 – Federal Agricultural Mortgage Corp. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates AGM as a Buy. The overall technical outlook remains bullish. Last changed October 6, 2016 from neutral.
Over the past few days, AGM has been basing sideways using the 127.2% Fibonacci extension of the September 2015 to May 2016 as support. Money Flow measure held firmly above the zero line, indicating there was little selling pressure. Tuesday’s upside breakout had helped clear resistance at the November high, signify resumption of the September upswing that project to over 60, based on the 161.8% Fibonacci extension.
Support is around 51. 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”]
Tuesday’s upside follow-through served as a confirmation to last Monday’s bullish breakout signal. Money Flow measure trended higher from above the zero line, indicating an increase in buying pressure. This is a bullish development and supported further upside follow-though and a test of our breakout target of 2270, which we’ve determined using the range top. A close above the November high of 2214 will confirm this.
In a longer term however, prolonged overbought conditions might put a cap on upside gains.
The lower end of the pink band, around 2190, represents key support. If it closes below 2190, the next leg is likely lower, and we’re looking at 2158, based on the trend channel moving average, but for now it looks firm.
In summary, Tuesday’s upside follow-through had confirmed Monday’s bullish breakout signal but we expect upside gains to be limited by prolonged overbought conditions.
(By：Michelle Mai for Capital Essence)
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