Market preview – trading plan w/o March 21, 2016

Weekly outlook  — S&P 500 cash index (SPX)

The S&P 500 cash index ($SPX) closed at 2049.58 last Friday, up 27.39 points for net weekly 1.35% gain.

Last week: SP500 index recovered all loss made early this year, and closed above with a small gain on Friday. The current movement tried to hint that 1810 level area could be low area for this year without final confirmation yet.

This week: FOMC and Quad Witch expiration are behind us. But the season for buying stocks hasn’t ended yet. We may see a minor pullback, but real weakness may not show up until the end of the month or next month. Any pullback may continue to be bought by new buyers in the early trading this week.

Technical analysis

a) Long-term

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SPX weekly chart. March 18, 2016

The Index closed above the 50-week moving average line last Friday and gave a bullish outlook. The PMO indicator (weekly) fast line crossed above the slow line and gave a buy signal for the intermediate-term. Based on weekly chart, the intermediate-term outlook is bullish, and the pattern remains bullish.

For the long-term the broad consolidation channel continues to influence the weekly and monthly charts. 2085.50-93.50 will be a major key resistance zone which needs to be watched.

A break above it could lead the SP500 index back up to last year’s high area or new highs. But in order to see this breakout, the big institutional investors have to participate. Without them, the index could retrace to retest the 50- and 200-week moving average lines again.

b) Short-term

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SPX Daily chart. March 18, 2016

The FOMC and quad witching expiration are behind us. The S&P500 closed under 2050 level, but remained above 200-day simple moving average line on Friday, which still gave a bullish outlook for the short-term.

In addition, there is an intermediate-term buy signal on the daily chart, which could hold index up until the favorable stock buying season dissipates.

The full measurement from the breakout of the bullish double bottom pattern will be around the 2085.25 area. There is also an unfilled gap at 2063.36 created on December 31, 2015 that needs to be closed.

This week we may see some weakness but the weakness shouldn’t damage the short-term uptrend as long as the 2000 level holds the index up this week.

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

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ESM6 Daily chart. March 18, 2016

ES had a gap up at the open and managed to hold up the gap for the end. The total trading volume was 18% lower than prior day, but the price action remained bullish.

2037.50 was this year’s open and Friday’s closing was 2037.50. So far ES has no change from the yearly open.

The ES tried to confirm that 1802.50 is this year’s low by recovering all of this year’s losses at the close. But final confirmation is still waiting for the March monthly closing next week.

Today the 200-day moving average line at 2012 will be the first short-term support. On the upside, 2043.50-2046.50 will be a breakout zone for any upside move.

A move above that area will persuade the buyers that the downtrend is broken and a momentum breakout move could push the price up to 2050-75 to test last December’s high.

A failure to break above it will lead to a minor pullback to retest last Friday’s low 2033-2027 or lower to 2021-23.50 zone. But “buy the dip” at the 200-day moving average line will continue to be a popular trade.

Support and resistance

Major support levels: 2023.50-21.75, 2014.50-16.75,1968.75-66, 1950-45, 1923.50-21
Major resistance levels: 2058.50-62.75, 2068.50-72.75, 2084-85.50

Outlook

Short-term —- Bullish
Medium term —–Bullish
Long term —- Neutral