The Stock Market Outlook for Monday was for a possible bounce but the bias was lower. The bounce today was bigger than expected but everything from an oversold condition to hammered retail stocks to news that Warren Buffett had placed a billion dollars into Apple stock in April got investors back into the buying mood.
The question is does this actually change the direction of stocks.
S&P Index Close
The S&P closed up 20.05 points for a gain of almost 1% to 2066.66.
Dow Jones Index Close
The Dow Jones recovered almost all of Friday’s loss with a gain of 175.39 points to close 1% higher at 17,710.71.
NASDAQ Index Close
The NASDAQ had the best move rising 1.22% for a gain of 57.78 points to close at 4,775.46.
Stock Market Outlook – Advance Decline Numbers
Volume was lower on Monday at 3.48 billion which is becoming typical of rallies. Declines have more volumes than rallies since February. Of those shares 81% were higher by the close. 74% of all stocks were rising with 23% falling. New highs came in at 110 which was unchanged from Friday while new lows fell to 21.
The NASDAQ traded just 1.7 billion shares again on Monday with 72% of all trades to the upside and 27% to the upside. New highs were 46 up slightly from Friday. New lows were lower again at 68. Friday new lows were 80 and Thursday the were 109.
While none of these numbers points to a strong rally continuing to advance the market, the new lows dropping over the past 3 trading days on the NASDAQ is an excellent sign. Overall though the size of volume being traded continues to disappoint.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for May 16 2016
Stock Market Outlook: Chart Comments:
The S&P closed below the 20 day simple moving average (SMA) but back above the 50 day moving average. It bounced off the Lower Bollinger Band which often is a sign of strength.
The 100 day has moved above the 200 day moving average which is a longer-term buy signal. The closing candlestick on Monday is often bearish on Tuesday.
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 weaker on Monday but in general the sell signal has not gained a lot of strength since April 22. Instead it is trending more sideways than either up or down. This indicates a sideways pattern with a bias lower.
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 also in a yo-yo like move as on Monday it turned back positive and was rising. Friday it was negative and moving lower.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative but trying to rise back up.
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. As it looks out more than day basically it is advising that the rally is suspect and it may be given back in the next couple of days.
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.
Stock Market Outlook for Tomorrow – Tuesday May 17 2016
The technical indicators at the close on Monday are more mixed than they were on Friday. 4 are still negative but not overly strong to the downside. The other two are positive but not overly strong to the upside.
The mixed outlook is advising that stocks need to show some follow-through and keep moving higher to give a clear indication the next move is up. Right now, the rally on Monday could be suspect as a one day event.
The outlook for Tuesday is for stocks to move sideways. I would expect some kind of follow-through but unless stocks can build strength to the upside, Monday will end up being another “one-day bounce”.
At the close the indicators look promising for more upside action, but overall the rally is suspect. I would expect a sideways move on Tuesday with a bias to the upside and a possible close a bit higher. Don’t however be surprised if the market gives back some of today’s rally on Tuesday.
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