Technical Analysis : Week 42/09

The S&P500 Index closed at 1071 last week. This indicates a gain of 46 points (4.5%) from the previous week’s close.

The market had 5 consecutives positive days in this week. The market had gained it bullish momentum after the major indexes hitting the 50 Moving Average line on last Friday. The market had play out this strategy for the past few months. Investors and traders had been buying from every single dip that the market present itself. Frenzy buying had been spotted at 20 MA and 50 MA levels. As long as there are no major shocking news, the street will likely to benefit from buying at every major support level of the moving average.

The optimism and confidence in the market are growing stronger with every better than expected earnings reports from major industry leader. Further evident of growing optimism can be found in the short interest data, VIX and VXN.

Amid the strong confidence in the market, there are several famous people warning the street on the health of the economy and the overrun in the stock market price. Fed Bullard warns over inflation and cautions unemployment is headed to double digits.

Looking at weekly candles, the S&P500 Index is suggesting a upside movement if it can break above this year high of 1080 in the coming week. The weekly chart shows a bullish ‘marabozu’ candle that indicates a positive ahead. Furthermore, the weekly chart also seems like a continuous pattern of the bullish trend.

Looking at daily candles, the S&P500 Index looks like it might be starting the week with a positive Monday. This is because the market ends up high at the last trading day.

The immediate support levels are S1: 1025, S2: 1000 and S3: 990.
The immediate resistance levels are R1: 1040, R2: 1060 and R3: 1080.

In conclusion, the market this coming week is likely to be bullish if it can break above the 1080 level. Earnings will once again be in the focus. All eyes will be on the big boys such as Bank of America, JP Morgan, Citigroup and Goldman Sachs. Traders had been shorting the Dollar, buying Gold, Oil, Stocks and even Bond. On a caution note, all the investment markets had been overcrowded recently. Any reversal or shocking news will turn the tide that will likely to be fast and furious.

“Market always make the majority look like a fool”

By,
Lawrence Chua