Weekly SPX preview – trading plan for June 29, 2015

Weekly outlook – S&P 500 Cash Index (SPX)

The S&P 500 cash index ($SPX) closed at 2101.49 last Friday, down 8.5 points for a loss of 0.4% for the week.

Last week all the attention was on the Greek debt crisis and the “deal or no deal” turmoil from Thursday into the weekend. The SPX just stayed in the middle of the short-term range and went nowhere on Friday, waiting for the next shoe to drop.

It is dropping this weekend: The Eurozone has cut off emergency liquidity for Greek banks, which are now going to be closed all week, and the Greek stock market will not open tomorrow. There is likely to be a lot of initial panic as Globex and othrer global markets open overnight. Fasten your seat belt: it is gong to be a bumpy ride.

This week is short due to the July 4 holiday, with the US markets closed on Friday. We may see a dip-and-pop move around the end and beginning of the month, but the main influences on the markets this week will be external. the final stages of th Greek debt crisis is in Europe and the response to the Chinese central bank interest rate cuts on Saturday (June 27). Many traders are waiting to see how the Shanghai market (down 7.39% last week) will react.

Technical analysis

a) Long-term

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SPX weekly chart

The short-term turbulence will be driving the markets in the early part of the week. But the technical indicators will start to be important again once the turbulence subsidies.

Last week we saw what could be the beginning of a possible short-term breakdown movement in the US equity markets. But we don’t expect that to extinguish the long-term uptrend.

We are in the summer doldrums, when traders retreat to golf courses or take their kids to the beach. Once the panic subsides, volume will be thin and volatility will be high – normal for the season.

The SPX has been in a five-year-plus rally, and a sideways consolidation move is what we should expect. This year the broad consolidation range should be from 2170 to 1930. The yearly pivot is at 2055, and that will be the key line at least for the summer.

As long as the price stays above the pivot, sentiment will continue to favor the upside. It would take a break below the 1930 level to change the intermediate-term uptrend direction, and we haven’t seen that price since October 2014. We are not likely to see it this week either.

b) Short-term

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SPX Daily chart

For the short term, there will be turbulence in the early part of the week, but the developing triangle pattern over the past four months has contained the price movement. The 2125 area has been strong resistance since February’s high; the 135-day moving average has been a rising support area, going back to 2012.

Each time the market challenged that resistance, the buying momentum disappeared immediately on the next day, a natural characteristic of a consolidation move. Each time a short-term correction threatened the 135-day moving average, the market rallied. We continue to expect it will hold the index up for this week. We are expecting 2078-75 area to be a support zone and 2100-10 to be a resistance zone for this week.

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Daily Outlook – S&P 500 Mini-futures (ES)

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ESU5 – daily chart

Last Friday ES had a fake breakdown move due to monthly re-balance and re-construction of the Russell indices. Even though ES managed to close above 2093.50, it was still below its key momentum support lines (20/40 ema daily).

Today and tomorrow are the last two trading days of June. The price could go both directions. It could retest the 2105-07 zone first if overnight holds above 2086, then drop back down again. Alternatively, it could go down first to retest 2075-72 zone if overnight trading drops below 2081. Our system predicts the monthly closing price should be under 2095 and above 2070.

However there are likely to be extreme fluctuations in price as the effects of the Greek crisis flow through the markets.

The major support levels: 2070.50-68.50 , 2064-62.50, 2053.50-50.50
the major resistance levels: 2107-08.50, 2122-25, 2134-36.50 and none

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

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