Weekly preview and trading plan for the week of Aug. 29, 2016

Weekly outlook — S&P 500 CASH INDEX (SPX)

The S&P 500 cash index ($SPX) closed at 2169.04 last Friday, down 14.83 points for a 0.67% net weekly loss.

Last week: SP500 index made new highs on Tuesday and then slowly dropped as we moved closer to Mrs. Yellen’s speech at the Fed conference at Jackson Hole on Friday.

After Yellen and various other Fed officials signaled a possible interest rate increase sooner rather than later the Index sold off further. However it still managed to bounce a little for the close.

This week: A further decline in early days and bounce later in the week should be expected. But any bounce may be stalled by the short-term sellers. Volatility is likely to be high.

Technical analysis

a) Long term

160826-SPX-weekly

SPX Aug. 26, 2016. Weekly chart.

The long-term and intermediate-term uptrend hasn’t been changed. Last Friday’s sell-off was short-term profit taking or a minor correction move.

The seasonality is unfavorable and the short-term pullback could last until mid-September. The price could drop into the 2120-2075 zone to test two weekly momentum support lines (2120 or 2075) depending on time and the speed of price movement.

The PMO indicator has an intermediate-term overbought condition, and the slow STO is overbought and forming a flat line.

If both indicators give a selling sign this week, we should then be prepared for an intermediate-term correction soon.

A weekly close below 2125 will be the first clue. However if it is not confirmed by a continuing decline in the price, it may be just another short-term oversold pullback that bounces from the 2120 level.

b) Short-term

160826-SPX-daily

SPX Aug. 26, 2016. Daily chart.

SP500 index broke its 14-day sideways range from 2195 to 2170 last Friday. The range breakout triggered a stop run, and first led the price down to 2160.39 level, and then bounced from the daily momentum second support (40ema) area.

This week the 40ema line (2158) will be a key line. A move below it could push the Index to its range momentum breakdown target at 2143.19.

The daily PMO indicator continues declining, which indicates there is at least one more push down before the price can have a decent bounce.

The usual bullishness around the end and beginning of the month could help the Index to hold up the 2140-2120 level this week.

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 weeks are free.

Want more?

You can get instant access to this valuable information and much more for as little as $9 per month. Please follow this link for the details.

Hi . Read or download the full trading plan here:

Download link: (160829-ES-plan.pdf, 444KB)

 

160826-ES-daily

ESU6 Aug. 26, 2016. Daily chart.

Fed officials at Jackson Hole clearly signaled an interest rate increase in the future and hinted – as they have before – it could happen as soon as the September meeting. That seems politically unlikely.

The ES sold off after the European market closed Friday but managed to close above 2165.50.

The price action was strong on the negative side, but the pullback wasn’t serious enough to damage the short-term uptrend. The ES remains above the major support zone 2145-35.50.

Today the 2165.50 level is a key line. Staying above it could lead ES to retest 2175 and 2180-85 zone, which would mainly be attempts to repeat last Friday’s range move.

A break below 2155 level will be slightly bearish. A further decline toward 2145-35.50 should then be expected.

The short-term indicators still point down, so any bounce may not last very long today. Focus on the short side if there is a bounce.

Support and resistance

Major support levels: 2155-56.50, 2146-43.50, 2133-28.50, 2103.50-00.75
Major resistance levels: 2188-89, 2196-93, 2103.50-06.50, 2214.50-12

Outlook

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