The S&P 500 cash index (SPX) closed at 1362.16 on Friday, up 27.16 points for a net weekly gain of 2%.
Last Friday, another EU summit announcement gave new birth to the bulls – again. It not only boosted to the European market, but also oil price (surged up 9.5%), Gold price (gained 3%) and the US stock market (closed high for a gain of 2.49% on one single day). A big winning week for U.S stocks. But weill it last?
This week is shortened due to the US holiday on July 4. The Market will close at 1pm on Tuesday July 3 through Wednesday July 4 and re-open Thursday July 5. The usual bullish holiday bias may help to hold up the price until July 6.
SPX Weekly chart
Technical Analysis
Based on the weekly chart (above), the key zone has been moved up to 1338.50-1340 from its previous 1335. SPX closed above it on Friday and gave the first early buying sign on the intermediate time-frame.
The weekly momentum indicators (10ema and 20ema lines overlapped) will continue to act as support and prevent the price from falling. Intermediate-term (MACD) indicator remains slightly above neutral territory, and indicates that $SPX probably holds above the key zone and challenges the highs.
Based on Wave principles, $SPX seems to complete wave 4 low, but so far it still didn’t give a final confirmation yet, Once it passes 1365 level, the confirmation will be given that wave 5 is in process.
We see three possibilities for wave 5: it could stall at 1410 or lower; it could go up to 1420-30; or it could go higher up to 1450. Each of those results will form a different pattern on the chart.
The level SPX$ should reach depend on how the market reacts to external news and how strong economic growth is. Once the price establishes its top level we will give a new assessment on the daily trading plan.
Last week, we mentioned the market volatility index ($VIX) chart looked bearish. VIX dropped from 21.30 to 16.84 last week so the bearish price move on $VIX has been confirmed.
When $VIX goes down price usually goes up, so the change in $VIX also confirms the bullish price move on equity market. $VIX could drop further down to 14-12 range this week, which could indicate the equity market is near its top area.
Last week, the 19th European summit meeting demonstrated European officials’ willingness to talk about giving money by the billions to troubled banks. Again it worked, and boosted the markets with a vengeance.
The announcement was made under strong selling pressure in both European and US markets, and it produced very nice end-of-quarter results, at least for now.
But as usual the details are still missing, including the most important one: where will the money come from?
This week the market will continues to focus on developments in Europe. Traders will keep a close watch on the European bond market reaction and whether or not there is an Interest rate cut by ECB.
Because US market will have holidays in the middle of week, the focus will be on the non-farm payroll report on July 6.
Monthly resistance 1400 and support 1290; Weekly resistance 1375 and support 1310.
To see the full analysis for the week of July 2, as well as the outlook fopr gold, oil, bonds and the $EUR, visit www.naturus.com. Free registration required.
