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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday December 22, 2016.
Stocks fell slightly on Wednesday amid lower oil prices and concerns over the stability of the European banks. Monte dei Paschi di Siena — Italy’s third-largest lender — said it could run out of cash in four months, much faster than the originally forecast 11 months. For the day, the Dow Jones industrial average slipped 32.66 points, or 0.16 percent, to close at 19,941.96. The S&P 500 fell 5.58 points, or 0.25 percent, to end at 2,265.18. The Nasdaq composite dropped 12.51 points, or 0.23 percent, to 5,471.43. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 1.57 percent to 11.27.
Halliburton Co (HAL) was a notable winner Wednesday, surged 3.06% to 54.96. This is bullish from a technical perspective. In fact, a closer look at the daily chart of HAL suggests that the stock could climb above 71 after the downward trend halted. Just so that you know, initially profiled in our May 12, 2016 “Swing Trader Bulletin” HAL had gained about 39% and remained well position. Below is an update look at a trade in HAL.
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 – Halliburton Co. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates HAL as a Buy. The overall technical outlook remains Bullish. Last changed November 30, 2016 from bearish.
The first dominant feature on the chart is the rising trend starting early February. The second dominant feature of the chart is the sideways consolidation between 53 and 55 since early December, which represented the digestion period. Wednesday’s upside breakout had helped clear resistances at the December falling trend line and the 61.8% Fibonacci retracement, clearing an important hurdle based on Fibonacci levels.
Money Flow measure surged to multi-month high, indicating an increase in buying pressure. This is a bullish development, supporting further upside follow-through. Additionally, the fact that HAL had retraced more than 61.8% of its prior downswing, suggested that the entire trend will eventually retrace. So, it seems to us that this rally could carry HAL above 71, based on the 2014 high.
Support is around 53. At this juncture, only a close below that level can wreck the near-term bullish outlook.
Chart 1.2 – S&P 500 index (daily)
Short-term technical outlook remains bullish. Last changed November 14 from neutral (see area ‘A’ in the chart).
[Note: for more details analysis, please take a look at our “US Market ETF Trading Map”]
No follow-through to Tuesday’s bullish breakout signal. In fact, Wednesday’s bearish reversal had put the index back into the sideways trading pattern that has dominated the market since early December. As shown, S&P trades in broad trading bands that define the trend behavior. The upswing was very rapid with some short-term consolidation near each of the significant support or resistance levels. These support and resistance levels also define the limits and barriers to any future rally and uptrend development.
Short-term trading range: 2262 to 2280. A close below 2262 will bring secondary support at 2233 into view but for now it looks firm. S&P has minor resistance near 2280. In order to build a sustain rally, the S&P must hurdle and sustain above that level. The bullish perspective is that an advance above 2280 will trigger acceleration toward the range top, around 2330.
Long-term trading range: 2200 to 2300. A close above 2300 on a weekly closing basis signify a bullish breakout with upside target around 2400.
In summary, S&P struggled near key technical resistance. There is a high probability of a period of consolidation activity between S&P’s 2262 and 2280 that may last several days. This consolidation band provides a rally and retreat trading environment for traders. However, market is volatile and tight stops are advisable.
(By：Michelle Mai for Capital Essence)
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