The S&P 500 cash index (SPX) closed at 1148.67 on Friday, for a net gain about 2% from the previous weekly close.
SPX broke its multiple monthly top (June and Aug) and held up well last week tp close at the higher level. Excessive investor optimism and range breakout momentum helped to hold the price above the previous resistance level and drove the market to the new highs.
This week we may see price go up first in the early part of the week for end-of-month window dressing, and pull back later. In addition the SPX is not far from our predicted target 1159.21, and profit taking should be expected as soon as the price approaches that target area.
This is an abbreviated versiion of Nat’s Weekly Market Outlook. To view the entire document, including the trading strategy for Monday, go to www.naturus.com. Free registration required.
Technical analysis
Daily Chart – S&P 500 Cash Index (SPX)
The SPX broke both the monthly consolidation range and the triangle pattern. It indicated that range swing trading period had ended when the breakout move triggered a strong uptrend movement. The 50-day moving average line crossed above the 200-day moving average and is rising higher than its August high. This long term signal confirmed that the breakout was a real move, and not a head-fake. This encouraged investors to step into the market and built strong upside momentum.
Monthly resistance 1160 and support 1100; Weekly resistance 1160 and support 1120
Outlook – S&P E-mini Futures (ESZ0)
Today ES could have a continuation high movement in the early session and push the price up to 1147-49 area to test January’s high. A break above 1150 could start a final squeezing move to push the price up to 1156.75-1162 range.
If we fail to breakout 1147-49 range, but instead break below 1138.50, ES could dip into 1132-28.50 level to retest last Friday’s intraday low. Friday’s gap is very important for the final upside target. It needs to remain unfilled in order to reach the 1156.75-1162 range. In any case, if ES breaks below 1125 it could be the first signal that we have already seen the price top or near top.
ESZ0 Intraday chart – 60-minute bars
