The stock market outlook for Friday was for the market to bounce and then head lower. There were two bounce attempts in the morning. The second attempt around 11:30 failed and the market fell into the afternoon. By 3:00 PM the S&P had broken through the 2055 and 2050 levels and reached 2045.13. A slight bounce at the close managed to move the index off its lows for the day at 2046.61 for a loss of 17.50 on the day.
Retailers were hit hard again on Friday as more investors continued to bail on most retail names but the department store retailers were the worst hit. Despite the drop in retail stocks, Retail numbers out on Friday painted stronger picture with a jump to 1.3% in retail spending. This was the largest month over month increase since March 2015.
Perhaps the best comment on Friday was from Mohannad Aama who is managing director at Beam Capital in New York who said ” The retail sales that we are seeing today is backward. I would put less weight on backward-looking data and I would put more weight on management’s discussion of guidance in the future, and that doesn’t look good.”
S&P Index Close
The S&P closed at 2046.61 down 17.50 for a loss of 0.85% on Friday.
Dow Jones Index Close
The Dow Jones lost more, falling 185.18 points to close at 17,535.32 for a loss of 1.05%.
NASDAQ Index Close
The NASDAQ fell 19.66 points and hand the smallest loss of the big three indicators closing at 4717.68, down 0.41%
Stock Market Outlook – Advance Decline Numbers
Volume was actually lower on Friday at 3.59 billion. Of those shares 62% were lower by the close. 65% of all stocks were falling with 32% were rising. New highs came in at 110 while new lows were up to 43.
The NASDAQ traded just 1.7 billion shares with 55% of all trades to the downside and 44% to the upside. New highs were 34 almost unchanged from Thursday. New lows were actually less at 80 than Thursday’s 109.
Once again, none of the above numbers point to the market being able to continue any kind of advance on Monday although the drop in new lows on the NASDAQ was nice to see, but new highs are poor pointing to continued weakness on the NASDAQ.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 13 2016
Stock Market Outlook: Chart Comments:
The S&P closed below both the 20 and 50 day simple moving average (SMA). It also reached the Lower Bollinger Band on Friday and tried to bounce off it.
The 100 day has moved above the 200 day moving average which is a longer-term buy signal. The closing candlestick on Friday is bearish for Monday.
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 resistance. Below that is 2050 which is light support.
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 negative and trending 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 sell signal on April 22. The sell signal was stronger on Friday.
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 negative and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and falling.
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 down for stocks.
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 down for stocks and is oversold.
Stock Market Outlook for Tomorrow – Monday May 16 2016
The technical indicators at the close on Friday now have 3 sell signals and three negative signals that are continuing to show further weakness. The closing candlestick was also bearish.
The general outlook is for further weakness on Monday although a bounce is possible at any time especially with the S&P down to the Lower Bollinger Band which often proceeds a bounce back. Staying cautious remains warranted but stay aware that a bounce can occur
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