The outlook for Monday was for stocks to open weak following the drop in oil prices but then to continue the advance. This is exactly what we saw on Monday. Tuesday though may see a different outlook following the plunge in Netflix despite beating on earnings. Netflix earned 6 cents per shares versus estimates of 3 cents although revenue was slightly light coming in at $1.96 billion versus the estimates of $1.97 billion. However the forward guidance from Netflix was for lower subscriber numbers than anticipated in the second half of the year. This sunk the stock by 13% after hours.
Oil fell on Monday but then clawed its way higher throughout the day to close down just marginally below $40 for WTI. (West Texas Intermediate).
S&P Index Close
The S&P pushed higher through the day on Monday and closed at the high of 2094.34 up 13.61 points and now above 2090.
Dow Jones Index Close
The Dow Jones closed at 18004.16, back above 18,000 for the highest close since July 2015. The rally added 106.70 points.
NASDAQ Index Close
The NASDAQ closed up 21.80 points to 4960.02.
Stock Market Outlook – Advance Decline Numbers
Volume was very low on Monday with just 3.3 billion shares traded, a decline of 390 million shares. Volume to the upside though was 73% and there were 138 new highs and just 6 new lows.
The NASDAQ traded 1.77 billion shares with 56% of all trades to the upside and 32% to the downside. New highs were up slightly at 60 and new lows were almost unchanged from Friday at 23.
Weakness in volume is continuing to keep investors on edge as while the market can climb on light volume, it can also quickly sell-off when volume is so low.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for April 18 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 20 day moving average again on Monday and at the Upper Bollinger Band. The closing candlestick is bullish for Tuesday.
The Bollinger Bands Squeeze is now ending with the Lower Bollinger Band falling lower and the Upper Bollinger Band moving higher. The Index looks like it will move higher out of the Bollinger Bands Squeeze.
The 20 day simple moving average (SMA) is moving higher still.
The 50 day moving average is also continuing to turn up as is the 100 day moving average.
The 200 day is still leading the market followed by the 100 day and we should stay aware of that indication, as medium-term it remains a bearish sign.
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 now 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 positive and rising.
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 5 which was pretty well gone on Monday. We should see a buy signal on Tuesday if the index does not pullback.
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 moving sideways which indicates that the market direction is still up but prices being paid are largely unchanged.
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 up for stocks and is now 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 although you can see a sharp downturn in the signal line from Friday. It is also extremely overbought.
Stock Market Outlook for Tomorrow – Tuesday Apr 19 2016
The technical indicators are still 5 to 1 positive for Tuesday.
Monday though was a bit stronger than I would have anticipated and often a push higher such as we saw on Monday on the back of “bad news” out of Sunday’s failed oil conference, could see weakness on Tuesday, especially at the open and into the morning.
Staying cautious will work again on Tuesday as I would not expect a large decline. Any dips and I will be selling more options for income on Tuesday. So for Tuesday expect some weakness but by the close I am expecting the SPX to be moving higher.
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