Weekly preview – trading plan for Aug. 1, 2016

Weekly outlook — S&P 500 cash index

The S&P 500 cash index ($SPX) closed at 2173.60 last Friday, down 1.43 points for a tiny weekly loss, and forming a weekly doji candle.

Last week: SP500 index made a new record high on Friday after spending most of the week in a sideways consolidation but fell back into the close. It had little reaction to the FOMC announcement Wednesday. The consolidation has lasted about two weeks and is beginning to look tired; what started as a pause in the rally is turning into a vacation.

This week: For the first week of August we may see an attempt to move higher in the early days. If it fails to move to new highs, there is a chance for a minor pullback to the 2135 area for testing.

Technical analysis

a) Long-term


SPX July 29, 2016. Weekly chart.

The SP500 has held the price up well since it broke the long-term resistance at 2135. The signs for the long-term are bullish. The uptrend remains intact.

The intermediate-term PMO indicator is approaching overbought territory. Last week’s doji candle indicates indecision as the index pauses near the recent highs.

The index may stay quiet for an extended period of time. But it could also follow the same pattern as last year: a high made in August, a retracement in September and a second rally in October.

This year is the presidential election year, and we may see something similar: highs in August, a retracement in September and then a roaring rally as the election approaches. That is a familiar pattern in the fourth year of the election cycle.

Alternatively, we may see large swings in both directions as the election campaign plays out. But it could also turn out to be big swing moves in both directions

b) Short-term


SPX July 29, 2016. Daily chart.

We have seen 12 days of consolidation trades, as the Index attempted to smooth out the short-term overbought condition.

Daily PMO indicator tried to move down in last two days, but it was not successful. Nevertheless, a minor pullback can’t be avoided.

2150 in the first support line and 2135 is the major support, which we expect will be held up this week.

For the upside, the major target is 2180-90,

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

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ESU6 July 29, 2016. Daily chart.

ES had a muted response to the Fed and the Bank of Japan actions last week. The news was unable to extend the ES range. I am not sure what ES will do this week, but we should expect some volatility today, on the first trading day of the week.

2165-2155 was last week’s major range. ES whipsawed inside this range and tried to shake out the weak hands on both sides.

For today, the first thing we will be looking at is the overnight trading range. The price could stay inside last week’s range.

Later we want to see which direction ES breaks. For an upside move, a break above 2173.50 could trigger some buy stops and push the price up to 2183.25-86 or higher up to the 2193 resistance line.

For the downside, a move below 2150 level could lead ES down to 2146 or lower toward 2135.50 level for testing. The 2135.50 monthly pivot level controls the bull trend. As long as ES holds above it, we are likely to see buying on the dips.

Support and resistance

Major support levels: 2155-56.50, 2146-43.50, 2133-28.50, 2103.50-00.75
Major resistance levels: 2180-85, 2196-93, 2210-12


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


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