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Good Morning, this is Capital Essence’s Market Outlook (the technical analysis of financial markets) for Tuesday July 19, 2016.
Stocks closed slightly higher Monday as Bank of America’s quarterly results helped investor’s risk appetite going into earnings season. For the day, the Dow Jones industrial average closed at a record high of 18,533.05, up 0.09 percent. The S&P 500 closed at a new record of 2,166.89, up 0.24 percent. investor confidence going into earnings season. The Nasdaq composite ended 0.52 percent higher for its highest close of the year of 5,055.78. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell 1.82 percent to 12.67.
Central Garden & Pet Co (CENT) was a notable winner Monday, rose 1.90% to 24.69 – a fresh 52-week high. This is bullish from a technical perspective. In fact, a closer look at the daily chart of CENT suggests that the stock could climb above 37 in the coming days. Just so that you know, initially profiled in our February 13, 2015 “Swing Trader Bulletin” CENT had gained about 183% and remained well position. Below is an update look at a trade in CENT.
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 – Central Garden & Pet Co. (daily)
As indicated in the above chart, our “U.S. Market Trading Map” rates CENT as a Buy. The overall technical outlook remains bullish. Last changed July 5, 2016 from neutral.
CENT has been on a tear in recent days after the early June correction found support near the trend channel moving average (as represents by the white line in the chart).
Monday’s upside breakout had helped clear resistance at last week’s pivot high, signaled resumption of the major upswing that has been in place since late 2014.
Money Flow measure trended higher from above the zero line, indicating an increase in buying pressure. This is a bullish development, suggesting that this rally could carry TDY above the 37 area, based on the 261.8% Fibonacci extension. Resistance stands in the way of continue rally is at the 161.8% Fibonacci extension, near 25.60.
Support is around 23.60. 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 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 continues basing sideways using the lower end of the red band as support. The fact that the index managed to hold on to most of recent gains despite overbought conditions is impressive. This certainly would argue that the near-term risk remains to the upside. Perhaps, the positive Money Flow measure is the best illustration of the bulls’ case.
Near-term, market craved out key support and resistance for traders to monitor. The lower end of the red band, around 2160, represents key support. A failure to hold above that level would signify a bearish reversal and retest of 2130 should follow shortly.
The range top, just below the important sentiment 2200 mark, represents key price level. Technically speaking, a trade above that level often marked significant market tops so traders should keep this on the trading radar.
In summary, S&P shifted to consolidation phase. The index is trapped in an increasingly tight trading range as traders wondered whether more gain is warranted given the massive advance over the past weeks. On balance, we remain bullish on stocks and looking to buy into short-term dips.
(By：Michelle Mai for Capital Essence)
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