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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Thursday June 30, 2016.
We’ve noted in the previous Market Outlook that: “S&P oversold relief bounce still has a hold.” As anticipated, stocks added on to recent winning streak, closed more than 1.5 percent higher Wednesday. For the day, the bench mark gauge closed up 34.68 points, or 1.70 percent, at 2,070.77. The Dow Jones industrial average closed up 284.96 points, or 1.64 percent, at 17,694.68. The Nasdaq composite closed up 87.38 points, or 1.86 percent, at 4,779.25. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 11.25 percent to 16.64.
Hecla Mining Co (HL) was a notable winner Wednesday, surged 4.88% to 4.94 – a 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of HL suggests that the stock could climb above 5.60 in the coming days. Just so that you know, initially profiled in our March 21, 2016 “Swing Trader Bulletin” HL had gained about 13% and remained well position. Below is an update look at a trade in HL.
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 – Hecla Mining Co. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates HL as a Buy. The overall technical outlook remains bullish. Last changed January 26, 2016 from bearish.
Over the past few days, HL has been basing sideways near the range top as traders digested the early June rally. Money Flow measure held firmly above the zero line since the stock reached an interim low in January, indicating there was little selling interest. This is a bullish development, supporting further upside follow-through. Wednesday’s upside breakout had helped clear resistance at the range top, signaled resumption of the January-May upswing that projects to 5.63, based on the 127.2 Fibonacci extension.
Support is around 4.60. 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 shifted to 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 tested and respected support at the bottom of its short-term trading range. Wednesday’s upside follow-through served as a confirmation and extension to Tuesday’s bullish reversal signal. This is a short-term positive development. With Wednesday’s gains, the index is up against the trend channel moving average, an area where other pullbacks during the prior two months found a floor. This history indicated an important role in term of resistance. Our short-term momentum indicators are presently neutral, but we think the bounce will be fleeting given strong overhead resistance. Perhaps, the negative Money Flow measure is the best illustration of the bears’ case.
Near-term, the market had carved out key support and resistance for traders to monitor. The trend channel moving average, currently at 2076, represents key resistance. A sustain advance above that level would see a pickup in longer term momentum, supporting further upside follow-through and a retest of 2100 but for now it looks firm.
As for support, there is a strong band of support between 2040 and 2050. A failure to hold above 2040 will bring 2000 back into view.
In summary, market is at a crucial spot as S&P testing broken support turned resistance. Short-term momentum has improved, but does not appear strong enough to generate sustain breakouts. As for strategy, we’d wait to buy the dips rather than chasing breakouts.
(By：Michelle Mai for Capital Essence)
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