The S&P 500 cash index (SPX) closed at 1369.10 on Friday, down 15.71 points for a net weekly loss of 1.1%.
Last week was full of bitter news on the street. First, the French President lost the election. Second, Greek voters managed to choose a kind of un-government – a lot of splinter parties but no real leadership. Both brought lots of uncertainty about economy recovery to the equity market. And at the end of the week JPM admitted it had lost at least $2 billion on a “hedging” trade and looked like they were not quite sure how the their whole “hedging” thing works. It all made investors nervous.
This week is expiration week for May options. A combination of chop and shakeout movement may occur before the market moves into the June option next week. SPX is not far from its major support zone. We may see a short-term low around 1325-16 area kicking in this week.
Weekly Outlook – S&P 500 Cash Index (SPX)
Daily outlook – S&P500 futures (ES)
ESM2 Daily Chart
ES pulled back into the range between April low 1352.50 and the March low 1335.25. Last week ES made a 1339.25 low, but managed to push price back up to 1350 line for closing.
So far ES is handling the bad news and Monthly lows fairly well. Price was chopping around 1350 line for a week and tried to form a new support. Today we may see a wide swing on both sides, due to last Friday’s closing at 1350. After the weekly option expiration, we may see the price run both down and up.
Short term has oversold condition, but intermediate-term just has its neutral condition. The consolidation range 1363-1340 will be a key level to watch. We may see ES move up to 1375 area to test the sell signal. If there is any chance for ES to move above 1384 level, a short squeeze could be seen. A break below 1330 will be bearish. A further dip into 1320-1312 range is then likely.
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