Weekly market preview – trading plan for November 14, 2016

Weekly outlook — S&P 500 CASH INDEX

The S&P 500 cash index ($SPX) closed at 2164.45 last Friday, up 79.25 points for 3.8% net weekly gain.

Last week: There was one surprise on top of another. The SP500 index was down slightly on the open after the surprise result of the US presidential election and kept rallying into the end of week. “Sell the rumor and buy the news” – a strategy we suggested last week – worked well last week.

This week: The is behind us and this week everyone will concentrate on the expiration of the major November options. 2160-2140 will be a consolidation zone. The NASDAQ needs to catch up to the other indices and participate in the rally. Without it, the buying may become exhausted.

Technical analysis

a) long and intermediate time frame

161111-spx-weekly

SPX Nov. 11, 2016. Weekly chart.

The SP500 index gained control of the short-term uptrend line last week. It ignored the deep overnight sell-off and managed to hold up the 50-week moving average line. Later the price moved further up, above short-term downtrend channel resistance line, and closed above it to declare the victory.

Based on the weekly chart, the short-term downtrend channel could be a bull flag for the next longer time-frame. 2083-28 zone could the low area of an intermediate-term correction, and could also be the low area for this rally if the index can move above 2200 to give final confirmation.

The weekly PMO indicator decelerates. And Slow STO indicator gave a minor buy signal at oversold territory.

But the overhead resistance at 2185-95 can’t be ignored. A failure to break above the overhead resistance zone, would mean there is still a chance the market will pull back and retest that spiking low of November 8, 2016.

b) Short-term

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SPX Nov. 11, 2016. Daily chart.

The S&P500 index stalled at its past monthly resistance zone 2185-95 and had some profit taking later on Thursday and Friday. Because Friday was a holiday for the banks, the low volume was acceptable.

The index was 3.8% higher, and traders are hoping to see the Trump rally push the index to new highs fairly soon. This week is the major November option expiration week. Before Friday index will try to hold above its daily momentum support zone (20/40ema line) and push higher up to 2200. Buying on dips will continue, at least in the first part of this week.

PMO indicator gave a buying signal in oversold territory. When it moves back near zero we may see buying exhaustion, which we expect will support a pull-back in the price.

Daily outlook – S&P 500 MINI FUTURES (ES)

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This section contains the detailed buy/sell levels for this week. It is reserved for paid subscribers. Previous market previews are available free of charge in the archives.

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161111-es-daily

ESZ6 Nov. 11, 2016. Daily chart.

ES had a small profit-taking move last Friday. However the price was held above the broken resistance of the short-term downtrend channel.

Today ES could retest last Friday’s globex trading range if overnight trading can hold ES above 2150 level.

ES will attempt to move up to fill last Friday’s 2167.25 unfilled gap or go higher up to 2180.50-83.50 if the buying momentum is strong.

Because 2183-93.50 was the past month’s strong resistance zone, we can’t rule out some profit taking to slow the rally, especially if overnight trading fails to move above 2165.50. In that case the price could fall further toward 2134-32 or lower.

Daily PMO indicator has a short-term buy signal, and slow STO indicator approaches overbought territory. An early pullback (if any) could be a profit taking move. The 20/40ema (daily) lines will be a key support at 2134-32. Only If that support is broken the ES could retest the 200-day moving average line in the 2085 area again.

Support and resistance

Major support levels:2145.25-44, 2136-32.50, 2126-23.50
Major resistance levels: 2193.50-95.50, 2108-10.50, 2223.50-21.75, 2231.25-34

Outlook

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