The stock market outlook for Thursday Apr 28 2016 was for stocks to stay weak but end higher. Well, there were weak, but the last hour of trading was particularly brutal for stocks. Once 2090 broke sellers jumped in. As a wave of selling from computers hit the markets the average investors jumped in as well and the market broke through 2085, and 2080 like slicing butter. Even the 2075 level broke twice in the last half hour before the market regained some composure and closing down 19.34 points to 2075.81 for a loss of 0.92%.
The selling was primarily caused by the decision by the Bank of Japan to cap monetary stimulus. This definitely shocked investors. As well the news from Carl Icahn that he was disappointed in Apple’s numbers and had sold out of his position also hit the markets hard. Apple stock fell another 3.06% to close at $94.83 off the day’s low of $94.83. In general the earnings this week are showing investors that average numbers of declining for the third straight quarter which is the longest slide since the credit crisis.
GDP also came in for the first quarter below estimates of 0.7% which in itself was low. Instead the GDP came in at 0.5% which for a lot of analysts points to looming recession. But at half a percent for the quarter this could still mean a 2% GDP for the year which while anemic is still growth. The fourth quarter for 2015 saw the economy at a 1.4% growth rate.
Meanwhile the Weekly Initial Unemployment Insurance Claims moved up slightly by 9000 to 257,000 which is still well below 300,000 and still at a 42.5 year low. With this many people working you have to wonder why the GDP is so low. GM auto sales did not show any slowdown so exactly how the economy can employ so many people and continue with so little output is somewhat a puzzlement. If you have an idea, share it in the comments below.
All of these contributed to the decline we saw in stock today in the late afternoon trading.
S&P Index Close
The S&P started the day out well and made it to 2099.30 by late morning. The close though was dismal with the S&P down 19.34 points to 2075.81. This is the lowest closed since April 12.
Dow Jones Index Close
The Dow Jones closed down 210.79 points to 17,830.76.
NASDAQ Index Close
The NASDAQ moved lower thanks to Apple and a handful of other tech stocks including Twitter and Intel with a close down 57.85 points to 4805.29.
Stock Market Outlook – Advance Decline Numbers
Volume picked up again on Thursday with 4.38 billion shares traded. There were 121 new highs and just 10 new lows. By the close only 32% of all volume was to the upside and 65% was to the downside.
The NASDAQ traded 2.1 billion shares. By the close 33% of that volume was to the upside and 67% was to the downside. There were 80 new highs and 24 new lows.
While volume numbers for the rally to continue Friday are poor, new highs versus new lows continues to point to further gains in stocks. This could easily change if more selling commences on Friday.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Apr 28 2016
Stock Market Outlook: Chart Comments:
The S&P closed below the Upper Bollinger Band again on Thursday and broke through the 20 day simple moving average (SMA) intraday. The close saw the S&P at the 20 day simple moving average (SMA). The closing candlestick is bearish for Friday.
We have had 6 bearish candlesticks before Wednesday bullish one. Obviously the bearish candlesticks were correct following today’s big drop.
The 20 day simple moving average (SMA) continued to climb and the 50 day simple moving average (SMA) is rapidly gaining on the 200 day and could cross over it by early next week unless selling intensifies. This would mark another major buy signal if it happens.
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.
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 which was reached today. 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 and falling.
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 gained strength today.
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 and falling.
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.
Stock Market Outlook for Tomorrow – Friday Apr 29 2016
The technical indicators no longer mixed. There are now 3 sell signals in place and only two positive technical indicators. The two positive indicators are rapidly falling.
This points to weakness on Friday and while we could see a bounce back at the start of the day, the market is set to close lower.
As this is the last trading day of April, and the next trading day is the start of May, investors are well aware that Monday will mark the start of the worst 6 months of the trading year. Stocks will have a hard time rallying higher with Apple Stock falling on Friday.
For Friday Apr 29 2016 the stock market outlook advises to look for trades with high levels of protection as stocks prepare to head into May.
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