The S&P 500 cash index (SPX) closed at 1283.35 on Friday, down 9.89 points, for a net weekly loss of about 0.76%. The holiday-shortened week, earning season plus option expiration increased the fluctuations in last week’s trading. But SPX still trades above its weekly support.
The SPX moves into the heart of earnings season this week, and many individual company reports will likely influence daily price moves.
Investors are expecting good earning numbers. But there is no guarantee this will happen, and disappointments may have a larger than expected impact.
FOMC interest rate announcement will be out this week. The street expects no change on the rate this time from Fed. But the accompanying statement may give a hint if the interest rate will change in the future. Or not
SPX Weekly chart
Based on SPX weekly chart (above), the intermediate term uptrend remains intact as long as price remains within the uptrend channel.
But up-wave iii or sub-wave 3 could end around 1296-1300 level if the uptrend continues losing momentum.
Last Friday the related markets made a non-confirmation move. DOW made new highs and held the gain of 0.7% due to good earnings from General Electric, while both SPX and Nasdaq lost ground on poor banking performance and weak guidance from F5 Networks.
The transportation index also failed to confirm the DOW move. Therefore the outlook for this week is mixed. We need to see the transportation index regain control above the 5230 level to eliminate the non-confirmation signal.
To this point we can treat last week’s decline as a minor correction. The 1250 level remains as support, and the 1300 level as resistance for the SPX.
The good news for the bulls is that demand for Feb option calls remains high at that level. It signals that the demand for U.S equities remains high from underweighted fund managers.
The bad news is that extremes in put-call ratio often mark the beginning of big corrections.
The market volatility index ($VIX) is holding up its 15 support level. If it continues moving up and breaks out 21.50 line, we may see SPX selling pressure increase.
Monthly resistance 1310 and support 1200; Weekly resistance 1300 and support 1250.
