Whereas Tuesday’s market was basically a day with oil prices falling and investors becoming increasingly concerned about the interest rate decision on Wednesday, Wednesday is actually all about the Fed. Finally on Wednesday Mar 15 2017 investors get to hear what most expect will be another rate increase from the Federal Reserve. Remember that when the Fed starts to raise rates, it has never happened that the Fed pulls back and then resumes. They always raise rates to what they perceive as normalized levels which is usually anywhere from 3% to 5% depending on circumstances. If the Fed’s “playbook” as described in December’s Fed interest rate announcement, is being followed, investors are probably looking at a rate by year-end of 1.5%. This same “playbook” indicates rates would increase in 2018 and 2019. If that is the case even a moderate rate of increase would mean 3% by the end of 2019 which is back to “normal” rates as far as Fed policy is concerned. What impact this will have on the economy after more than 8 years of near zero interest rates is hard to judge but there will be impacts and changes. Tomorrow then is probably more pivotal than the prior interest rate increases because as of tomorrow, with a rate increase the Fed’s fund rate will be 1%, the highest level since fall 2008.
Let’s look at the closings on Tuesday and then take a technical overview.
S&P Index Close
The S&P index ended the day down 8.02 points to close at 2365.45.
Dow Jones Index Close
The Dow Jones ended down 44.11 points to close at 20,837.37.
NASDAQ Index Close
The NASDAQ closed down 18.97 points ending the day at 5,856.82.
Stock Market Outlook
Chart Comments At The Close:
On Tuesday Mar 14 2017 the S&P moved lower and ended the day with a bearish candlestick right at the middle Bollinger Bands.
For the prior 3 trading days the Middle Bollinger Band has been keeping the market up. Each dip to the Middle Bollinger Band or near the Middle Bollinger Band resulted in a bounce. Today that was not the case and during the day, the S&P slipped below the Middle Bollinger Band for the first time since February 2.
The next level of support is at the 2350 level, which is light support and then the 2300 level which is better support. The best support for 2017 is at the 2250 level. All the major moving averages are continuing to rise but that could begin to change if the S&P slips below the 21 day moving average.
Meanwhile the market continues to move closer to a probable Bollinger Bands Squeeze which you can see forming in the chart below.
Stock Market Outlook review of Mar 14 2017
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is moving sideways and remaining slightly positive.
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 sell signal Mar 7 2017. At the close of trading today the sell signal was stronger.
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 but also moving sideways with the market.
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 down signal in place as of the close today.
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 falling lower again, which signals lower prices lie 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. The Relative Strength Index (RSI) moved lower today.
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 a down signal in place.
Support Levels To Be Aware Of:
The likelihood of a bounce off the 21 day moving average is slimmer.
The market has light support at the 2300 and better 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 Mar 15 2017
The technical indicators have moved still weaker today. There are three strong sell signals in the market as MACD increased the strength of its sell signal after Tuesday’s down day.
All signals have pulled back dramatically now and show more weakness headings into Wednesday’s Fed announcement.
Remember that sometimes the markets will move higher into the Fed rate decision. If it will happen, it will probably be on Wednesday right after midday prior to the 2:00 PM decision.
For Wednesday though, unless there is no rate hike for March, the market will move lower. It is now all about the Fed.
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