Weekly preview and trading plan – week of Oct. 10, 2016

Weekly outlook  — S&P 500 Cash Index

The S&P 500 cash index ($SPX) closed at 2153.74 last Friday, down 14.53 points for 0.67% net weekly loss.

Last week: The SP500 index had an inside weekly range move. It anticipated NFP and sold off a little in reaction to the Hurricane Matthew news.

This week: This is the week before the major October monthly option expiration, and the index could struggle to move down, testing either 2135 or 2110 before a bounce in the following week. Alternatively it could continue sideways to build support above 2135 level. The Monday, Wednesday and Friday index option price will move before the index price, and perhaps influence the index price move.

Technical analysis

a) Long and intermediate term

161007-spx-weekly

SPX to Oct. 7, 2016. Weekly chart.

The intermediate-term outlook remains in an overbought condition. Last week the index had another narrow weekly range, which signifies that the market is in contraction mode.

The 20-week moving average line (2135.75) will be the line to watch carefully this week. A break below it could trigger a momentum run on the downside and push the index down somewhere above the 2100 level.

Holding above 2135-37.50 could lead the index to continue the pump-and-dump patteren we have seen recently to kill time until after the election.

b) Short term

161007-spx-daily

SPX to Oct. 7, 2016. Daily chart.

There is not much change in the short term. The Index chopped around the 20/40ema lines and gave no direction. The Daily PMO indicator failed to give a short-term buy signal, but stays in the neutral area.

I still expect we will get a whipsaw move first. Hurricane Matthew and the resulting damage may provide an excuse for the Fed to avoid a rate increase, but also limits any market rally too. The broad range from 2190 to 2110 could contain the index price until the election is over.

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

Member content

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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161007-es-daily

ESZ6 to Oct. 7, 2016. Daily chart.

ES bumped along the 20/40ema lines and remained inside the triangle pattern for closing. It has been in the same holding pattern for nine days already.

Today is Columbus day. Banks close. The trading volume will be low. 2148.50 will be the key line.

ES is likely to repeat last Friday’s trading pattern before it settles on a new direction. A break above 2164 could push the price up to 2171.50-73.50, which could be a reversal line for pullback.

A move below 2135.50 could lead ES to dip into the 2125-23 zone. Ultra-short-term indicators have neutral signs and hint that the ES can continue going sideways.

Sell the early rallies and buy weakness later should be seen again.

Support and resistance

Major support levels: 2135-33. 2123-21.50, 2112-13.50, 2103.50-01.75
Major resistance levels: 2171-72.50, 2181.50-78.50 , 2188-90.50, 2200-01.50

Outlook

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