Stock Market Outlook for August 2 2016 – More Weakness and Lower

Despite weakness in the overall market the S&P and NASDAQ managed to set a new 52 week high intraday today. The advance by Apple Stock to $106.19 and Alphabet Stock (GOOG) to $772.88 helped to push the NASDAQ to a new 52 week high but still below the all-time high. The S&P pushed almost to 2180 in the morning but as crude collapsed below $40 a barrel for the lowest level since April, the S&P couldn’t hold the gains. The plunge in oil sent Exxon Mobil and Chevron stocks down over 3 percent, setting up the biggest drag on the index for Monday.

Despite the advance by Apple of 9 percent since reporting earnings just last week, investors today fixated on oil and manufacturing data that showed orders in July fell broadly and construction spending dropped in June. This added to the poor GDP numbers that came out on Friday and instilled nervousness in the markets on Monday.

S&P Index Close

The S&P index on Monday pushed to a new 52 week record close but then pulled back as oil dropped below $40. The close saw the index down 2.76 points to 2170.84.

Dow Jones Index Close

The Dow closed lower by 27.73 points to 18404.51.

NASDAQ Index Close

The NASDAQ rose to a new intraday 52 week high on Monday brushing against 5200 when it reached 5199.13. It closed at 5184.20 up 22.06.

Stock Market Outlook – Technical Indicators At The Close

Stock Market Outlook - Aug 1 2016

Stock Market Outlook – Aug 1 2016

Stock Market Outlook: Chart Comments:

The S&P has been moving sideways for 12 trading days. There have been a slew of bearish candlesticks at the close and today ended with yet another bearish candlestick.

All the major moving averages are moving higher but you can see that a possible Bollinger Bands Squeeze is still forming. This will either send the index higher or lower. At present it looks to be lower.

Stock Market Outlook: Support and Resistance Levels:

These are the present support and resistance levels.

2160 is very light support.

2100 is light support.

2090 is very light support.

2075 is also light support

Below that is 2050 which is light support.

2025 is better support than 2050 through to 2090.

2000 is primary support.

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 moving sideways. It is close to turning negative but has not done so for four days.

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 July 1. On Monday MACD issued an unconfirmed sell signal on the S&P.

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 moving sideways.

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 extremely overbought and has a down signal in place.

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 Stochasticis is also overbought and now has a down signal in place.

Stock Market Outlook for Tomorrow – August 2 2016

The technical indicators are changing to weakness. MACD issued an unconfirmed sell signal and both stochastic indicators have sell signal in place. The momentum indicator is ready to turn negative. Overall weakness in the market is taking a toll on the advance, even as the S&P makes new highs.

For Tuesday the outlook is negative for stocks. I would expect a lower close.


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