Weekly preview and trading plan for Aug. 8, 2016

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

Synopsis

The S&P 500 cash index ($SPX) closed at 2182.87 last Friday, up 9.27 points for a net weekly gain of 0.4%.

Last week: SP500 index had a minor retracement before the ADP private employment report Wednesday. Later it went higher after the Non-Farm Payroll was released Friday pre-market and closed at all-time record highs. It seems that the market doesn’t anticipate any interest rate hike this year.

This week: The index could bump to a new high level again. The market sentiment is bullish. But $VIX may not give any help to the buyers in the ultra-short-term.

Technical analysis

1. Long-term

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SPX Aug. 5, 2016. Weekly chart.

There is not much change on the weekly chart. The 2135 level has been holding up since it was broken three weeks ago. The signs for the long-term remain bullish. The uptrend remains intact.

The intermediate-term PMO indicator has a positive convergence. It is rising along with the price. It will be difficult to say when the long-term trend will change direction, but both PMO and STO are moving into overbought territory, which hints that the intermediate and short time frame outlooks are less bullish.

2. Short-term

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SPX Aug. 5, 2016. Daily chart.

The SP500 index had a large consolidation range in first half of the year. It formed a bottom range at 2025-1991.68 and a top range at 2111.05-21116.5.

The Index broke this range last month and has stayed above it since then. The measured targets from the breakout should be at 2196.19 and 2230.42 if we base the calculation on the short break below the 200-day moving average line. The index likely heads towards those targets.

For the short term, traders need to pay attention to the momentum, which represents internal strength. The PMO indicator needs to move up to help buyers reach those upside targets. Without it, the breakout could be a false move.

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

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ESU6 Aug. 5, 2016. Daily chart.

ES finally broke the narrow consolidation range (2172.50-2141.50) that had been containing the price for 13 days, and made new highs at 2178.50 on Friday. It also managed to close above the breakout point 2172.50, which is considered to be bullish price action.

Now the slow STO indicator turns up from its neutral area and gives a short-term buy signal.

The daily PMO indicator still has a sell sign, but seems it is indicating a bottom and getting ready to give a new buy sign soon.

Today 2162-2160 zone will be first support area to watch carefully. As long as overnight trading holds ES above it, new highs can still be made again.

A break above 2183.50 could push price up to 2190.75-93.50 or higher up to 2197.75-2203.25, the psychological resistance area.

A move below 2159 level could lead ES down to 2155 -50 area, which is a major support for this week.

Support and resistance

Major support levels: 2155-56.50, 2146-43.50, 2133-28.50, 2103.50-00.75
Major resistance levels: 2183-85, 2196-93, 2103.50-06.50, 2214.50-12

Outlook

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