Weekly preview and trading plan, week of Oct. 24, 2016

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

The S&P 500 cash index ($SPX) closed at 2141.16 last Friday, up 8.18 points for a 0.3% net weekly gain.

Last week: The SP500 index had a short-term oversold bounce. But price managed to hold under its broken momentum support zone (2155-50) for the weekly closing, which didn’t change the recent neutral outlook.

This week: The week will be busy. Four Fed members will speak on Monday and lots of key economic reports will be released, especially the GDP report on the coming Friday. The end-of-month window dressing could help hold the index from falling below September’s low.

Technical analysis

a) Long and intermediate term

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SPX to Oct. 21, 2016. Weekly chart.

The intermediate-term overbought condition remains. The short-term oversold bounce didn’t change the direction of the weekly PMO and STO indicators, which continue pointing down.

There are too many things that can affect the natural price movement going on this week. The most important that nobody wants to mention is the large option positions being held, and the increasing number of option expirations.

The different option expiration days largely control the index moves outside its price range. The larger the number of expiration dates within a week, the greater the potential price swings.

b) Short term

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SPX Oct. 21, 2016. Daily chart.

The oversold bounce seems to be countered by the overhead resistance lines. The S&P500 index struggled to reach the 20/50ema lines and then moved down. It shows that the short- and intermediate-term outlooks have a bearish bias.

However the long 15-week rectangle pattern (2190 to 2120 range) is still intact. The whipsaw move could continue into the end of this week.

The 20EMA line crossed below the 50EMA line and gave a short-term selling signal last week. 2150-55 zone will be a key zone for this week. A stay under this zone could lead the index to retest the support zone at 2120-10 again.

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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ESZ6 Oct. 21, 2016. Daily chart.

ES continued to hold the price under 2141, the ultra-short-term broken support line.

Today ES is likely to retest last Friday’s high at 2138.50 or higher up to last week’s high area 2144.50 if overnight trading holds above 2123 (last Friday’s low).

The multiple speeches by Fed members will affect the price movement this week.

2130.50 will be a control line. Holding above it could push the price up to 2138.50-39.50 or higher up to 2147-45. A fail to hold above it could lead price to drop into 2123-25 for testing. But 2123-20 could hold ES up today.

The daily PMO indicator seems to lack the energy to move up, and the STO indicator has reached its neutral area and is preparing to move back down again. Both indicate the internal buying strength was not strong last week. Therefore we can’t rule out the possibility we will test September’s low one more time.

Support and resistance

Major support levels: 2116-14.50, 2106.50-07.50, 2100.50-2098.50, 2089-88
Major resistance levels: 2162-64, 2171-72.50, 2181.50-78.50 , 2188-90.50

Outlook

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