Technical Analysis : Week 34/09

The S&P500 Index closed at 1004 last week. This indicates a loss of 6 points (-0.6%) from the previous week’s close. This week loss marked the 5th candle reversal in the weekly candles.

Previously …

“ Looking at weekly candles, the S&P500 Index is suggesting a pause to the upside in the coming week. This is because the S&P500 Index is at its 4th consecutive week of positive gains and is likely to be a doji candle for a 5th candle reversal pattern. If that is the worst that can happen, then the best we can get is more healthy upsides.”

Last week the market traded pretty sideways to the downside. The market traded sideways in the range of 992 to 1010 for the week. The market should have traded even lower than the 1000 level if not for the “Stick Save” that happened throughout the week. The “Stick Save” refers to the sudden spike in the last 15 to 30 minutes in the closing bell.

The market started badly in the first two days of the week due to profit taking ahead of the FOMC announcement on Wednesday. The Fed maintained the Fed Fund Rate’s record low interest rate of 0.25% on Wednesday. The market rallied as the Fed did not come out with any surprising news. However the Fed did hint that they would be in the process of slowing down the purchase of long term Treasuries and shut off the program by this coming October. The market continued to rally till Thursday because of the better than expected GDP report from the European giants, France and Germany.

On Friday, the market fell off quickly as it threatened to wipe off the gains from Wednesday and Thursday when the worst than expected Consumer Sentiment report was revealed. The market proved to be resilient as the “Stick Save” appeared in the last 30 minutes to send the S&P500 up to close above the 1000 level.

Looking at weekly candles, the S&P500 Index is suggesting a pause to the downside in the coming week. This is because the weekly candle indicates a Doji pattern. However looking at the Doji, the bulls had more of an upper hand than the bears. The bears will be making waves if the S&P500 can convincingly break below the 990 level in the coming week.

Looking at daily candles, the S&P500 Index looks like it might be testing the low of 992 on Monday. The daily candle did not show any clear sign of direction but the market seems to be testing the lows rather than the highs.

The immediate support levels are S1: 1000, S2: 990 and S3: 980.
The immediate resistance levels are R1: 1025, R2: 1050 and R3: 1100.

The Dollar Index (DXY) closed at 79 for the week again. The dollar will likely to gain strength as the markets go into the risk aversion trade.

In conclusion, the market this coming week should be going down and trading between the range of 1000 and 980. The market will be expected to trade lower if the housing data does not meet expectations. Further sell off from the Chinese market are likely to spill over into the western markets and the rest of the world.

As of the time of this report, Monday is expected to make a major sell-off to start the week on a negative note. S&P Futures have been reading -1.75% to -2.15% all afternoon and now during the pre-market. Asian markets closed averagely -3.25% to the downside and European markets are trading -2.50% down.