Stocks once again turned weak on Thursday extending the declines into a third day. The declines have been modest but the outlook remains weak. Thursday was primarily all about the economic outlook from Britain which showed it grew by 0.5 percent between July to September which was enough to make investors and analysts expect not to see a rate cut from the Bank of England. The surprising growth, despite the decision to leave the EU saw the worst single day sell-off in government bonds in months and globally markets reacted negatively. With European stocks sliding on Thursday, the dollar climbed which put some pressure on equities in North America. Britain’s 1- year gilt rose 12 basis points to 1.27% which was the biggest single day gain since June 2015. At home the Weekly Initial Unemployment Insurance Claims continued to point to the lowest levels of unemployment in 43 years which set the market up for further weakness as investors worried about a possible rate increase as early as November, in addition to December. By the end of the day all of this worked to push stocks to slight losses again.
S&P Index Close
The S&P index closed down to 2133.04 which was near the day’s low.
Dow Jones Index Close
The Dow Jones closed down 0.16% to 18,169.68.
NASDAQ Index Close
The NASDAQ had the biggest loss falling to 5215.97 for a drop of 34.30, adding to Wednesday’s loss of 33.13 points.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook: Chart Comments:
There is no technical chart available this evening.
The close today left another bearish candlestick for Friday but Thursday’s drop was not as severe as Wednesday’s so we could see a pop higher at the open or early in the morning trading.
The SPX Index closed below the 100 day moving average on Thursday which is the first close below the 100 day since Oct 17.
The Bollinger Bands are continuing to turn lower, with the 20 day and 50 day moving averages now falling deeper and the 100 day beginning to turn lower. The 200 day moving average is no longer rising but is now sideways indicating weakness is growing.
The chart pattern is becoming bearish.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
The market was trying to build some support at the 2180 level. At present this is now resistance.
2160 was very light support.
2150 was support.
2125 is light support.
2100 is light support.
2090 is very light support.
2075 is also light support
Below that is 2050 which is light support.
2025 is better support than 2050 through to 2090.
2000 is primary support.
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.
Stock Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum is neutral at the close but over the past few weeks it has been more sideways than either up or down.
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 Oct 11 2016. On October 24 it issued an unconfirmed buy signal when it turned positive. On Thursday Oct 27 that unconfirmed buy signal was lost as a new sell signal has emerged.
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 heading lower.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and today moved to its lowest level since Sept 19.
Slow Stochastic: The slow stochastic is not being used at present while my provider tries to work out the kinks from their new system.
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 issued a strong sell signal at the close of trading on Thursday.
Stock Market Outlook for Tomorrow – Oct 28 2016
For Friday as you can see from the technical indicators above, the negative signs are far outweighing the positive ones. The loss of the MACD buy signal is particularly distressing. The outlook for Friday is for stocks to end the day lower.
We could see a pop in the morning but overall stocks appear headed lower. The Fed may try to talk the “market” up again shortly, but that may not have much impact at the present time. Friday could test 2125 or the 2120 level again.
The stock market outlook for Oct 28 is that a bounce is possible but overall the direction is lower.
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