The outlook for the past two days has been for weakness with a bias shifting lower. This is understandable after a run-up of 14 percent in the S&P. Yesterday’s move to 2110 in the S&P brought out sellers who in the last hour of the day on Wednesday sent stocks back to the 2100 level keeping resistance to a further advance in check at 2110. Today that resistance showed as the market continued to stay under pressure.
Oil fell back on Thursday by the close to $43.18 a barrel for WTI. This was actually a slight drop of $1.00 but many analysts believe oil will fall further shortly. But today’s drop was more than just oil and sellers. It was also about interest rate concerns following a stunning profit from General Motors which more than doubled its earnings from the same quarter a year earlier. General Motors showed strength in sales throughout North America and in Europe which many investors believe means interest rates will rise sooner rather than later and cut off the rally earlier than expected. That sentiment seemed to hold credibility when the Weekly Initial Unemployment Insurance Claims are viewed. With the number of unemployed now down at levels not seen since 1973 many analysts believe that the large number of employed are part of the reason for the surge in auto and truck sales. Many analysts believe it is just a matter of time before inflation starts to rise which again means interest rates will rise. All of this weighed on investors on Thursday and sent stocks lower into the close.
S&P Index Close
The S&P was unable to recover to 2100 today and rose only to 2103.78 before closing at 2091.48 down 10.92 points.
Dow Jones Index Close
The Dow Jones fell back below 18000 to close down 113.75 points to 17,982.52.
NASDAQ Index Close
The NASDAQ which closed down on Wednesday held up the best of the three major indexes and closed down just 2.24 points to 4945.89.
Stock Market Outlook – Advance Decline Numbers
Volume was steady on Thursday at 4.1 billion shares. Volume to the upside was just 31% by the close with declining volume rising to 68%. New highs fell quickly to just 69, quite a drop from Wednesday. There were only 9 new52 week lows.
The NASDAQ traded 1.9 billion shares with 41% of all volume to the upside and 59% to the downside. Advancing issues were 46% while declining issues made up 49%. New highs dipped slightly to 50 and new lows were unchanged at 21.
These numbers do not point to a major decline coming soon. They point to continued weakness in the market and a slip below 2090 looks more likely to occur but these numbers do not correspond with any kind of large plunge.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook from Thursday Apr 21 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 20 day moving average and just below the Upper Bollinger Band but the closing candlestick was bearish again on Thursday which is the third day in a row for a bearish signal at the close of trading.
The Bollinger Bands Squeeze is over and the major moving averages of the 50, 100 and 200 day are starting to converge. If the 50 day moves above the 100 day it will give a major buy signal.
The 20 day simple moving average (SMA) is moving higher still.
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 positive and climbing but in general it has been drifting more sideways than 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 buy signal on April 19 which is still not confirmed.
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 falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but drifting lower confirming prices are falling for the majority of equities.
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 and is 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 down for stocks and is also overbought.
Stock Market Outlook for Tomorrow – Friday Apr 22 2016
The technical indicators are now 3 to 2 positive for Friday with one indicator still neutral, namely MACD. These are not the signals needed for the market to push higher on Friday. Instead, stocks look set to try to rally in the morning and then pullback again. I am not expecting a strong move lower. There are no signals that would confirm such a view. Instead the technical outlook appears to be more for the overbought condition to be reduced and for stocks to gather additional strength from investors before advancing again.
Friday could also be poor following disappointing earnings from Alphabet, Microsoft, Starbucks and VISA after hours on Thursday.
Staying cautious continues to be warranted for Friday’s trading.
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