Thursday stocks fell as investors fretted about whether an interest rate would come earlier than December. As well, concerns over global economic growth continued and oil pulled back. The drop in energy stocks and financial stocks on Thursday turned the stock market outlook for Thursday bearish.
Selling picked up and volume moved up slightly. This brought in more sellers which turned the day strongly negative.
S&P Index Close
The S&P closed down 24.75 points wiping out all of Wednesday’s gain to lose 1.2% and close at 2041.91. During the day however, the S&P broke below 2040 and 2-35 to reach 2033.80 intraday. This is the best bearish signal the market has seen in about three weeks.
Dow Jones Index Close
The Dow Jones closed down 174.09 although at one point it was down over 230 points. The Dow closed at 17,541.96.
NASDAQ Index Close
The NASDAQ closed down 72.35 points wiping out Wednesday’s gain to close at 4848.37.
Stock Market Outlook – Advance Decline Numbers
Volume was higher by 100 million shares to 3.8 billion on Thursday.
By the close 78% of volume was moving lower. There were 73 new highs and just 16 new lows.
As explained on Wednesday, Thursday was a pivotal day for the markets. By the end of the day the market direction had turned lower.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for Apr 7 2016
Stock Market Outlook: Chart Comments:
The S&P closed just above the 20 day moving average after falling below it intraday. The index closed above the 200 day moving average.
The Bollinger Bands Squeeze is now underway and the market looks possibly positions to pullback into the squeeze.
The 20 day simple moving average (SMA) is still rising higher after crossing above the 200 day exponential moving average (EMA).
The 50 day moving average is continuing to turn up and as you can see in the chart the 100 day is also now turning higher and by the end of the week or next week it could cross up and above the 200 day. This would be a major buy signal if it happens.
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 was light support and is now resistance. Below that is 2050 which is now resistance.
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 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 5 which was stronger on Thursday.
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 faling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving sideways indicating that prices being paid are not under significant pressure yet, despite the selling on Thursday.
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 it is set for daily. The Fast Stochastic is signaling down for stocks.
Stock Market Outlook for Tomorrow – Friday Apr 8 2016
The technical indicators are now split with 3 sell signals and 3 positive signals that are weakening.
Wednesday’s rally was given back today which is never a good thing for the market but something stocks have done repeatedly since the start of 2015, not just 2016. Normally following a day like Thursday when a large rally is given back, stocks bounce at the open and then are still lower by the close.
The stock market outlook for Friday is for stocks to move lower and end negative.
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