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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday August 23, 2016.
We’ve noted in the previous Market Outlook that: “we remain near-term ‘neutral/positive’ for S&P as we believe recent consolidation phase has helped alleviate widespread overbought conditions. However, resistance is strong in the 2190-2200 area, and short-term momentum does not appear strong enough to generate a decisive breakout. Short-term traders could play the range. However, markets are volatile and traders may prefer not to hold large positions overnight.” As anticipated, stocks drifted on Monday, closing mixed on light volume as traders looked ahead to Yellen’s Friday speech in Jackson Hole, Wyoming. The annual Fed symposium is sometimes used by Fed officials to make important policy statements. For the day, S&P was down 1 at 2,182 and Dow was off 23 at 18,529 while Nasdaq was lifted with biotech, rising 6 to 5,244. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, surged 8.2 percent to 12.27.
Cytokinetics Inc. (CYTK) was a notable winner Monday, jumped 3.4% on strong volume to 12.17. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CYTK suggests that the stock could climb above 14 in the coming days. Just so that you know, initially profiled in our July 21, 2016 “Swing Trader Bulletin” CYTK had gained about 25% and remained well position. Below is an update look at a trade in CYTK.
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 – Cytokinetics Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CYTK as a Buy. The overall technical outlook remains bullish. Last changed June 15, 2016 from neutral.
Over the past few days, CYTK has been trending lower in a short-term corrective mode as traders digested the July massive rally. Monday’s upside breakout had helped clear resistance at the August falling trend line, signaled resumption of the March upswing. Money Flow measure held firmly above the zero line throughout recent correction, indicating there was little selling pressure. This is a bullish development, supporting further upside follow-through and a test of key technical resistance at the 2013 high, around 14.20. Resistance stands in the way of continue rally is at the 2015 high of 13.18
Support is at the weekly pivot low around 11.45. 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 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 continues basing sideways using the 2175 zone as support level. General speaking, the S&P is basically unchanged since last Friday. That’s actually not a bad sign considering the late June massive rally. Money Flow measure hovers near multi-month high, indicating a positive net demand for stocks. This bullish development, suggesting that S&P will test the important sentiment 2200 mark sooner rather than later.
For the near term, the market has carved out key short-term resistance and support levels for traders to monitor. For now, 2200 will continue to act as price magnet. A close above it on a daily basis would signify a breakout that support further upside follow-through and a test of the lower end of the red band, around 2230.
While 2200 is acting as resistance, 2175 is currently the main level of support. That level is significant in charting terms. It roughly corresponds with the lower edge of the pink band. It was where the market peaked in July. This history indicated an important role in terms of support. A failure to hold above that level would signify a bearish breakout and a retest of the trend channel moving average, currently at 2134, should be expected.
In summary, S&P stuck in a holding pattern as traders wonders whether more gain is warranted given the massive advance over the past months. A close above 2200 on a daily basis would signify a breakout, supporting upside follow-through in the days ahead. On balance, we remain bullish on the S&P and looking to buy into market dips.
(By：Michelle Mai for Capital Essence)
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