Today’s Stock Market Outlook was for some weakness to creep into the rally. Stocks should move higher and close higher but the overbought condition meant there could be a test of 2100 or even 2095 on Tuesday. The market did not get that low, but instead it moved higher to 2119 but as oil closed at a 10 month higher just above $50, some selling started. By 3:00 PM heavier selling erupted and all the indexes gave back most of the day’s rally. The NASDAQ turned negative by the close.
S&P Index Close
The S&P spent the morning climbing but by 1:00 PM with the S&P closing in on 2120 the index fell back and closed up just 2.72 points to 2112.13.
Dow Jones Index Close
The Dow Jones jumped at the on and then traded sideways hitting 18000 several times. The last hour saw determined selling which ended the DY with a gain of 17.95 points to close at 17,938.28.
NASDAQ Index Close
The NASDAQ took a different course and opened sideways, dipping around 11:00 AM to 4963 but then fighting back to almost reach 4980around 1:00 PM. Selling started and expanded in the last hour with the last half hour being the worst. The close was negative with a slight loss of 6.96 points to close at 4961.75.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for June 8 2016
Stock Market Outlook: Chart Comments:
The S&P closed below the Upper Bollinger Band and well above all the major moving averages. The closing candlestick is bearish for Wednesday. This is the third bearish candlestick in a row. Often this signals that the rally is overdone and just needed a bit more time to pullback.
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. Overall the market is now set up as it should be with the 50 day, following by the 100 day followed by the 200 day.
The S&P index is at its highest level since November 4 2015 and at the highest level for 2016.
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 still resistance and has not been decisively broken. We will need a couple more days of activity above 2100 before it will become support.
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 moving sideways.
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 was unchanged again 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 positive and back moving sideways indicating the rally is running out of steam.
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 issued a sell signal today and is extremely overbought.
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 also issued a sell signal and it too is extremely overbought.
Stock Market Outlook for Tomorrow – Wednesday Jun 8 2016
For Wednesday the technical indicators are showing weakness. There are now two sell signals. Other signals of concern are the buy signal from MACD which is not growing in strength which would signal a sustained rally.
The rate of change is unchanged advising that the prices being paid are not changing by much. Momentum is sideways and should be moving higher and the Ultimate Oscillator is overbought.
All the signals are pointing to the rally weakening. The rally was built on the back of Janet Yellen’s interest rate comments which seemed to suggest there would be no rate increase in June. This boosted stocks but we have seen this type of rally before. Only so much enthusiasm can carry stocks for a few days and then the reality sets in and stocks weaken.
It would appear that is what we are seeing develop. The outlook for Wednesday then is for some weakness, probably some negative trading for the indexes but a still positive close.
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