The market outlook for Wednesday was primarily that the majority of investors and analysts were correct and the Fed would not increase interest rates. This set the markets on the trend up.
One thing from the Fed announcement that was somewhat surprising was the sudden dovish tone on future interest rate expectations as the Fed Chair Janet Yellen made it clear that only two additional rate hikes were being anticipated for this year. She also explained that none of the rate hikes were “in stone” and that the Federal Reserve does examine data continuously to assist in decision-making. The outlook for 2017 was actually quite dovish as well and interest rates are expected to stay low for an extended period of time.
It was this dovish stance that seem to push the markets higher, rather than no interest rate increase being announced for March.
S&P 500
The morning saw the S&P move up slightly but stay below the 2020 level. As the lunch hour wore on investors became a bit more nervous ahead of the Fed announcement and the market moved to the low of the day at 2010.04. After the announcement trading was choppy to start but by 2:15 a bottom was in and the S&P moved higher and broke to 2030 three times before closing off the high at 2027.22, up 11.29 for the day and at the highest level so far in 2016.
Dow Jones Index
The Dow Jones following the Fed’s announcement also roared higher and twice broke through 17360 before closing up 74.23 points at 17,325.76.
NASDAQ
The NASDAQ in the morning rose to 4,740, the best increase of the three major indexes. After the announcement it worked it way to above 4,770 before closing up 35.30 at 4,763.97.
Market Outlook – Advance Decline Numbers
Volume on Wednesday rose more than half a billion shares to 4.05 billion. New highs picked up in the afternoon with 91 new highs and just 19 new lows. This is one of the better showings for new highs. If they can get over 100 and then above 125, the rally will have enough push to move higher.
73% of all volume was to the upside and 79% of all stocks on New York were rising.
Market Outlook – Technical Indicators At The Close
Market Outlook for March 16 2016
Market Outlook: Stock Chart Comments:
The S&P closed above the 200 day moving average again on Wednesday. The closing candlestick was again bearish for the next day.
The 20 day simple moving average (SMA) is rushing higher to meet the 100 day. When it crosses over it, that will provide another buy signal for the market.
The Upper Bollinger Band is now turning higher and could move the Bollinger Bands away from a potential Bollinger Bands Squeeze. For the first time the 50 day simple moving average (SMA) is starting to turn up as well.
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 was light support and is now resistance. Below that is 2050 which is resistance.
Light 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.
Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and moving 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 buy signal Feb 16 which continued to be weak on Wednesday.
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, overbought and rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and higher. The signal at the close was a drop to 6.94. This is still a high reading but it is a drop and could be indicating that prices are no longer rising but starting to fall.
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 neutral for stocks and is extremely overbought.
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 it is set for daily. The Fast Stochastic is signaling up for stocks nut is more neutral than up or down and is extremely overbought.
Market Outlook for Tomorrow – Thursday Mar 17 2016
Today’s technical indicators are still positive but show that the overbought condition of the market is still strong. A number of the indicators are pointing to weakness for Thursday including the two stochastic indicators, rate of change and the MACD reading. Momentum is not rising but staying sideways and the Ultimate Oscillator is signaling very overbought.
The market outlook for Thursday is for the market to experience a small pullback after today’s Fed news. If the market does not experience weakness on Thursday it should by Friday. On Thursday we could see a rise in stocks at the open. I would expect a pullback in the mid-morning to stretch into the lunch hour. The afternoon could be weak with a rally attempt but it may end with the market closing lower to flat.
The new 52 highs and lows however, point to any pullback as being temporary at this stage and after a day or two of weakness, the market should move higher to the 2050 level.
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