Weekly market preview – trading plan for Aug. 22, 2016

Weekly outlook — S&P 500 Cash index

The S&P 500 cash index ($SPX) closed at 2183.87 last Friday, down 0.18 points for a tiny weekly loss.

Last week: SP500 index went sideways again, Even though it made new all time highs early in the week and ran some ticks on the downside, it mainly remains within the prior week’s range. A typical contraction move.

This week: The contraction could be ended soon, and the following move could explode into high volatility. The Fed is the driver; the mixed messages coming from the Fed could drive the market in n orderly fashion, but they could also send it spinning out of control.

Technical analysis

a) Long-term

160819-SPX-weekly

SPX Aug. 19, 2016. Weekly chart.

Not much change in the long-term chart. Profit-taking at or near the 2200 level could be the short-term problem.

Since July the market has been slowly grinding up with frequent new highs on slender volume, and without any significant pull back.

The shorts have been getting murdered, but the Bulls have no conviction. It is not natural market price behavior.

The intermediate-term PMO indicator is still rising along with the price rises and remains positive, but it gets more overbought. It should be due for pullback soon.

b) Short-term

160819-SPX-daily

SPX Aug. 19, 2016. Daily chart.

SP500 index spent 11 days going sideways in a range from 2195 to 2170. It is due for a breakout move and it could be seen this week.

The Fed will be the major driving force for this market. Yellen’s speech on Friday may give a clear direction about any interest rate hike. The SP500 index could have a high volatility move.

Daily PMO indicator continues to move down. It indicates that internal strength remains weak, and there is limited room for a breakout to the upside.
On the downside, just about a year ago – on August 24, 2015 – we had a major down move when the index lost 133.75 points in a single day. Will history repeat? It certainly could, and the parallels should be enough to make you cautious.

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

Member content

This section contains the specific buy/sell numbers for this week. It is reserved for paid subscribers.