Market preview – trading plan for Apr. 4, 2016

Weekly outlook — S&P 500 Cash index

The S&P 500 cash index ($SPX) closed at 2072.78 last Friday, up 36.84 points for net weekly gain of 2%.

Last week: SP500 index had a strong rally again last week. It not only recovered the loss from the previous week, also it cleared the 2050 resistance line to make new highs for this year. Up to now, the index already has a 2% gain for the year.

This week: The first week of the second quarter in 2016. The classical bullish end and beginning of month period possibly carries into Tuesday. The index is near Q4 2015 high area. A minor pullback may be seen. But the pullback will not damage the uptrend.

Technical analysis

a) Long-term

160401-SPX-weekly

SPX Weekly chart. Apr. 1, 2016.

The S&P500 index broke the resistance line at the upper boundary of the downtrend channel last week. This broken resistance line is likely turning into support in the short term.

The price is now moving closer to a resistance area around the highs posted in last May and December. It may meet some turbulence there, and the advance could slow or stall in that area.

But with a strong market breadth, a major drop shouldn’t occur. Any pullback is likely to be absorbed, and trend should move higher.

160401-SPX-ADline

NYSE A-D line

The NYSE Advance-Decline line (click to enlarge) managed to hold above last year’s high and move higher. This indicates the market breadth is strong, and largely supports the uptrend. Even though it doesn’t rule out a market pullback from overhead resistance, the pullback should still be a part of uptrend move.

b) Short-term

160401-SPX-daily

SPX daily chart. Apr. 1, 2016

The SP500 index gave a second buy signal on the daily chart. The uptrend remains intact as long as the 200-day moving average line holds the price up.

The index has fully cleared the sell signal given on Dec/Jan (the red arrow on the chart). It suggests the current trend should carry higher.

Overhead the resistance will be the December/November highs at the 2100 level. We may see some a minor pullback from there. The major support is lying at the 20/200-day moving average line at 2020-2015 zone. “Buy on the pullback” will continue to be the strategy this week.

There are nine appearances by Fed officials (including Janet Yellen) this week and the FOMC minutes on Wednesday.

Daily outlook – S&P 500 Mini futures (ES)

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