The stock market outlook for Monday May 2 2016 was for stocks to try to bounce in the morning but then close negative on the day. Instead stocks opened above Friday’s close and climbed above 2070 by 10:30.
From there the morning was spent with stocks trading above the 2070 level in a tight range of less than 6 points. Selling though was limited which means there was very little pressure on stocks in the morning. That brought in buyers who over the lunch hour commenced a rally that by 1:30 had the S&P at 2077.
The last half of the day stocks spent pushing to move above 2080. The final hour of trading didn’t see the typical computer trading that usually dominates. Instead stocks managed to hang onto their gains and closed above the 2080 level at 2071.43. For the entire day the stock market outlook remained positive.
S&P intraday chart for May 2 2016
S&P Index Close
The S&P rose 0.78% to add on 16.13 points to close at 2081.43.
Dow Jones Index Close
The Dow Jones rose 117.52 points to close at 17,891.16.
NASDAQ Index Close
The NASDAQ rallied 0.88% to move higher by 42.24 points to close at 4817.59.
Stock Market Outlook – Advance Decline Numbers
Trading was steady throughout much of the day and volume was average at 3.8 billion shares. There were 115 new highs and 10 new lows. Up volume was 55% while down volume was 45%. However 62% of all stocks were rising by the close.
The NASDAQ traded 2.75 billion shares but despite the positive close, 60% of all volume was moving lower thanks in large part to Apple Stock which closed down again on Monday.
There were 52 new highs and 31 new lows. 56% of all stocks were rising on the NASDAQ while 41% were declining.
The stock market outlook by way of volume continues to suggest that there is some underlying strength in the market although most investors continue to remain cautious of the market presently.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 2 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 20 day simple moving average (SMA) intraday and the closing candlestick is bullish stocks on Tuesday.
The 50 day simple moving average (SMA) is now above the 200 day moving average and the 100 day moving average is ready to move above the 200 day. These are strong buy signals for the market.
The Bollinger Bands are still trending more sideways than up which points to stocks still moving sideways rather than higher. This could change to lower.
Stocks need to get back above 2100 quickly or risk losing momentum.
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 also 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.
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 remains strong on Monday.
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 rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving sideways.
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 but is on the verge of a buy signal as you can see in the technical chart from today’s close..
Stock Market Outlook for Tomorrow – Tuesday May 3 2016
The technical indicators at the close on Tuesday are 4 negative and 2 positive. However the Fast Stochastic is on the verge of a buy signal and momentum and Moving Average Convergence / Divergence indicators both have very weak sell signals in place.
Monday though could have been a bounce. Tuesday will give a better indication of where the stock market is heading.
Looking at the technical indicators, there is a good chance for stocks to be choppy on Tuesday but I am not expecting much of a drop if they do move lower. Friday is the non-farm payroll number which is often a “game changer”. I am expecting nothing new for the employment picture. Therefore we could see some sideways days moving into Friday. With the S&P now above 2080 the market appears ready to trend sideways but keep an upward bias.
For Tuesday look for the market to stay positive but end the day only slightly higher. If the market closes lower I would not expect it to be lower than 2070.
I do think Monday was more a bounce than anything else. The market must prove it has strength and to do that it needs to move above 2100 quickly. Otherwise it risks falling back lower later this week.
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