Weekly preview – trading plan for May 31, 2016

Weekly outlook β€” S&P 500 CASH INDEX

The S&P 500 cash index ($SPX) closed at 2099.06 last Friday, up 45.74 points for a net weekly gain of 2.2%

Last week: SP500 index breached its short-term bearish H&S pattern and triggered short-covering. The price closed near the top area of April and may be able to close above 2100 for May.

This week: The classical bullish end and beginning of the month may help to continue holding up the index. The price could challenge the long-term resistance zone lying ahead.

Technical analysis

a) Long-term

160527-SPX-weekly

SPX May 27, 2016. Weekly chart.

The long-term consolidation range has been formed from 2112 to 1800. The SPX has been traveling inside this range since 2015. A strong breakout is needed before we can determine if and how far the index could move to the upside.

So far the outlook for the index remains bullish on the long-term and intermediate-term charts but without a breakout.

Over the next two weeks there is the possibility the index will make breakout in a decisive manner. A failure to break through the resistance of the consolidation range could lead to a short-term or very-short-term pullback. In any case we still expect the intermediate-term support at 1830 will continue to hold the index up.

b) Short-term

160527-SPX-daily

SPX May 27, 2016. Daily chart

SP500 index NOT ONLY breached its bearish H&S pattern, it also broke its short-term downtrend channel to trigger a bull flag breakout run.

However the run up was stopped at strong overhead resistance and went sideways in a narrow range for Thursday and Friday.

We will need to see a decisive breakout above the all-time highs before we can get a minimum upside target based on this flag. If there is no breakout we may get an ultra-short-term pullback, but in any case we do not expect a serious correction.

The index has a new short-term buy signal. The volume was very low, but the PMO triggered a new crossover buy signal, and price did close near the overhead resistance rather than being turned away. It suggest that the low volume may not be significant right now.

However, for the past two years every time the SPX has moved above 2100 is has fallen back. It could do that again this time.

Daily outlook – S&P 500 MINI FUTURES (ES)

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