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Stock Market Outlook for June 1 2016 – Sideways But Up

May 31, 2016 | Stock Market Outlook

Historically the stock market outlook for Wednesday June 1 should be higher. For the first trading day of June, the Dow Jones Index has been higher in 20 of the last 27 years. For down years, losses have always been quite modest. The worst June was 2011 when the index lost 2.2%. In 2008 the index lost 1.1%.

However today (May 31) should have been a slightly up day for stocks as historically, May 31 has been up for stocks. Instead there were losses in all the indexes.

S&P Index Close

The S&P had a wild day and twice in the late afternoon the index fell below 2090. The close though saw computer software jump in and buy shares, pushing the S&P back up for a very mild loss of just 2.10 points. The S&P closed at 2096.96.

Dow Jones Index Close

The Dow Jones had a far worse day thanks in large art to Disney Stock which pulled back. The Dow closed down almost half a percent for a loss of 86.02 points to end the day at 17,787.20.

NASDAQ Index Close

The NASDAQ managed to post a gain during the last 30 minutes of trading and recovered from a drop down to 4,923.03 to close up 14.55 points to 4,948.05.

Stock Market Outlook – Technical Indicators At The Close

Stock Market Outlook for May 31 2016

Stock Market Outlook for May 31 2016

Stock Market Outlook: Chart Comments:

The S&P closed on Tuesday at the Upper Bollinger Band and above all the major moving averages. The closing candlestick however is bearish for stocks for a second trading day.

The SPX continues to be led by the 50 day and then the 100 day both of which are rising which is an up signal for stocks.

The index is back moving sideways rather than higher. The outlook for Wednesday is for the same movement, namely sideways.

Stock Market Outlook: Support and Resistance Levels:

These are the present support and resistance levels. These levels have not changed since January 2015.

2100 is resistance.

2075 is light support. Below that is 2050 which is light support.

There is light support at 2025.

Better support is at 2000.

Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support as is 1920. 1900 is more symbolic than anything else.

1870 is support. 1840 continues to be support. The 1820 level is light support. The strongest support level is at 1800.

1775 and 1750 are both critical support for the present bull market. While 1775 is important it is 1750 that is the bottom line.

A break of 1750 would mark a severe correction from the all-time high of 2134.72.  This would be the biggest correction since the plunge in 2011 of a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.

Stock Market Outlook Technical Signals

Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and drifting lower.

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 on May 25. The strength of the buy signal continued to grow on Tuesday.

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 very overbought.

Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is neutral and drifting sideways which indicates rising prices are not expected.

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 is signaling up for stocks and is overbought. It is on the verge of providing a sell signal.

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 set for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic is signaling up for stocks and is also overbought. It too is nearing the point where it could issue a sell signal.

Stock Market Outlook for Tomorrow – Wednesday Jun 1 2016

The technical indicators are pointing higher for stocks for Wednesday. There are signals that the market is very overbought which often leads to a decline in share prices. However any decline will be an opportunity to sell more naked puts. Historically the first day of June is also bullish. I am not expecting  large move higher, but the outlook is for higher prices on the TSX despite the oversold condition.


 

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