The S&P 500 Has Broken To the Downside of a Short-Term Rectangle

Big companies reporting earnings this week include Costco, General Mills and Nike.

Downtrend 2

On Tuesday, Nike (NKE) is awaited to post first quarter EPS of $0.42 compared to $0.86 a year ago on sales of $9.0 billion vs $10.7 billion last year. The Co designs and manufactures sportswear, and on September 9th, Bloomberg disclosed that the Co failed in an attempt to get the U.S. International Trade Commission to put an import ban on certain shoes from Skechers and New Balance on accusations of trademark infringement for it's Converse brand. Technically speaking, the RSI is above 50. The MACD is positive and below its signal line. The stock could retrace in the short term. Moreover, the stock is above its 20 and 50 day MA (respectively at $114.24 and $105.64). We are looking at the final target of $128.60 with a stop-loss set at $110.70.

On Wednesday, General Mills (GIS) is likely to unveil first quarter EPS of $0.87 vs $0.79 last year on revenue of $4.2 billion compared to $4.0 billion a year ago. The Co operates a global packaged food business and on September 15th, the Co announced the launch of its new ketogenic friendly product line ':ratio' in order to help consumers find ways to cut back on their carb and sugar intake. From a chartist's point of view, the RSI is trading below 30. This could mean that either the stock is in a lasting downtrend or just oversold and that therefore a rebound could shape (look for bullish divergence in this case). The MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at $61.5 and $63.08). We are looking at the final target of $52.90 with a stop-loss set at $60.00. 

On Thursday, Costco Wholesale (COST) is expected to announce fourth quarter EPS of $2.82 compared to $2.69 a year ago on revenue of $52.1 billion vs 47.5 billion last year. The Co operates a chain of warehouse stores and its current analyst consensus rating is 20 buys, 14 holds and 2 sells, according to Bloomberg. In other news, on August 28th, the Co committed 25 million dollars to a new investment fund that will help fuel Black-led financial institutions and community development efforts. From a technical point of view, the RSI is below 50. The MACD is positive and below its signal line. The MACD must penetrate its zero line to expect further downside. Moreover, the share stands below its 20 and 50 day MA (respectively at $344.57 and $336.79). We are looking at the final target of $312.00 with a stop-loss set at $350.00.  

Also on Thursday, CarMax (KMX) is anticipated to release second quarter EPS of $1.01 vs $1.40 last year on sales of $5.1 billion compared to $5.2 billion a year ago. The Co operates a car and light truck retail chain, and its stock price is anticipated to move up or down by 8.4% based on options volatility. The stock dropped 6.2% after they last reported earnings. Looking at a daily chart, the RSI is below 50. The MACD is below its signal line and positive. The MACD must penetrate its zero line to expect further downside. Moreover, the stock is below its 20 day MA ($105.69) but above its 50 day MA ($100.68). We are looking at the final target of $95.20 with a stop-loss set at $108.10.

Today, Etsy (ETSY), Catalent (CTLT) and Teradyne (TER) were added to the S&P 500 index, replacing H&R Block (HRB), Coty (COTY) and Kohl's (KSS). 

Looking at the S&P 500 CFD on a 30 minute chart, the index has broken out to the downside of a short-term rectangle pattern that price has been holding within since the second week of September. Price will likely continue downward and hit 3,200.00, a level last reached in late-July. The index could then bounce off of 3,200.00 and test its 3,280.00 resistance level, where price will probably halt before turning back down. Price will likely break below its 3,200.00 support level and fall further to 3,155.00. If price manages to get above 3,280.00 then it will mostly likely be stopped at 3,310.00. However, if price gets above 3,310.00, we could witness the index recover some ground and grind higher.         



Source: GAIN Capital, TradingView

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