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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday August 9, 2016.
We’ve noted in the previous Market Outlook that: “S&P cleared key resistance Friday, but we expect upside follow-through to be limited by short-term overbought conditions.” As anticipated, stocks close slightly lower on Monday as traders digested the latest batch economics data. For the day, the bench mark gauge fell 1.98 points, or 0.09 percent, to trade at 2,180.89. The Dow Jones industrial average closed 14.24 points lower, or 0.08 percent, at 18,529. The Nasdaq slipped 7.98 points, or 0.15 percent, to end at 5,213.14. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 0.97 percent to 11.50.
Vail Resorts Inc. (MTN) was a notable winner Monday, surged 7.98% to 155.46 – a fresh 52-week high after it agreed to buy Canadian resort operator Whistler Blackcomb for about $1.1 billion. This is definitely a positive sign going forward. In fact, a closer look at the daily chart of MTN suggests that the stock could climb above 200 in the coming days. Just so that you know, initially profiled in our February 25, 2016 “Swing Trader Bulletin” MTN had gained about 22% and remained well position. Below is an update look at a trade in MTN.
The graphics below are from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red. The yellow bars identify period of neutral or sideways trading pattern. Additionally, the light-blue shading represents the short-term trading range. A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading). Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.
Chart 1.1 – Vail Resorts Inc. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates MTN as a Buy. The overall technical outlook remains bullish. Last changed August 8, 2016 from neutral.
Over the past few weeks, MTN had been basing sideways near the range top as it works off the overbought condition. Money Flow measure held firmly above the zero line, indicating there was little selling pressure. Monday’s upside breakout had helped clear resistance at the range top, signaled resumption of the 2015 upswing that projects to 212, based on the 261.8% Fibonacci extension. Resistance stands in the way of continue rally is around 162, based on the 161.8% Fibonacci extension.
Support is around 145. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Near-term technical outlook remains bullish. Last changed June 29 from bearish (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
S&P moved down to test support at last week’s bullish breakout point after early rally attempt ran out of steam near 2185. Short-term momentum has deteriorated, but does not appear strong enough to generate widespread breakdowns. Support is strong in the 2175 area. While more backing and filling would not be a surprise, we think traders should buy the dips in anticipation of a rally to at least 2200 in the days ahead.
For now, 2200 represents key price level. That level roughly corresponds with the lower end of the red band, or extreme overbought zone. As it was the case of late, a trade above that level often marked significant market top so traders should keep it on the trading radar.
Immediate support is at recent breakout point, around the 2175 zone. A failure to hold above it, will jeopardize last week’s bullish signal and a retest of 2150 should follow shortly.
In summary, S&P registered an overbought sell signal but support is strong in the 2175 area and momentum does not appear strong enough to generate a decisive breakdown. The index could see some near-term weakness, but ultimately push itself higher. As for strategy, pullback will present a buying opportunity, while selling into strength may not be the best strategy in a market considered likely to bounce back.
(By：Michelle Mai for Capital Essence)
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