On Tuesday Feb 21 stocks were stronger than I had expected. The outlook was for a bit of weakness in the morning but a higher close. Instead stocks moved higher in the morning, pushing beyond 2360. By the afternoon fresh buying commenced and the S&P closed at 2365.
The S&P is closing in on 2400 while the Dow Jones is 260 points away from 21,000. The NASDAQ is just 134 points away from 6000. We would have to expect that the choppiness should become more common as the indexes push to these valuations. Let’s review today’s closing all-time highs for all 3 indexes and then take a technical look at the S&P.
S&P Index Close
The S&P index ended the day up 14.22 points for a gain of 0.60% to close at 2365.38
Dow Jones Index Close
The Dow Jones ended up 118.95 points to close at 20,743.00 for another record high close
NASDAQ Index Close
The NASDAQ closed up 27.37 points to end the day at 5,865.95
Stock Market Outlook
Stock Market Outlook review of Feb 21 2017
Chart Comments At The Close:
On Tuesday the S&P closed at the Upper Bollinger Band which is a bullish signal and an overbought signal. Since Feb 9 the rally has added 65 points for a gain of almost 3%.
The Lower Bollinger Band has fallen below the 50 day moving average and is almost ready to fall below the 100 day which would be quite bullish. All the major moving averages are rising.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and rising.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal Feb 10 2017. The buy signal continues to gain strength.
Ultimate Oscillator: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months. The Ultimate Oscillator is positive and rising. It is overbought.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic has a neutral signal in place and is extremely overbought.
Rate of Change: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. The rate of change signal is positive and rising indicating higher prices are still ahead.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. RSI is extremely overbought and at readings that almost always signal a pullback should be expected at any time.
Fast Stochastic: For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings, but settings I use for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic has an up signal in place and is also extremely overbought.
Support Levels To Be Aware Of:
The market has light support at the 2250 level. There is also light support at 2195 but better support is at 2180 and then 2150.
Stock Market Outlook for Tomorrow – Wednesday Feb 22 2017
The technical indicators on Tuesday Feb 21 are showing signs of being extremely overbought.
There are no negative signals of any kind.
All the signals are pointing up and one signal, the Slow Stochastic is neutral. Almost all the technical indicators are extremely overbought and almost always this ends with the indexes pulling back a bit to work out the overbought condition, which will allow stocks to move still higher.
For Wednesday Feb 22 2017 the market is extremely overbought and a dip should be expected at any time. Trading should become more choppy but the bias is still to the upside for stocks, although rallies as strong as today should not be expected. Instead I would expect a far more modest advance on Wednesday.
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