Thursday’s Weekly Initial Unemployment Insurance Claims report spooked investors on Friday and as talk of a September interest rate hike intensified, the market opened with a dip down to 2175. The dip was bought into by investors but the close remained negative. Utilities were hit hard as were bonds as investors weighed the chance of a September rate hike. San Francisco Fed President John Williams re-iterated comments that September should see a rate increase. This came on top of New York Fed President William Dudley’s same observations made earlier in the week. As well this upcoming week is the Jackson Hole central bankers meeting which often keeps investors on edge in case Fed Chair Janet Yellen should say something more concrete about a possible September rate hike. The chance of a rate increase also pushed the dollar higher on Friday and dropping the price of gold.
S&P Index Close
The S&P index recovered from a dip to 2175.13 to close down just 3.15 points at 2,183.87.
Dow Jones Index Close
The Dow dropped below 18500 intraday on Friday before recovering to close down 45.13 points at 18,552.57.
NASDAQ Index Close
The NASDAQ again had the best day of the three major indexes. It closed down just 1.77 points at 5,238.38.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for Aug 19 2016
Stock Market Outlook: Chart Comments:
The SPX closed slightly lower on Friday. Intraday in the morning it broke through the 20 day simple moving average (SMA) but managed to close above it. The 20 day simple moving average (SMA) is beginning to turn down. All the other major moving averages are continuing to advance.
The Bollinger Bands Squeeze now looks like it may try to send the S&P lower but the range being traded by the S&P is very small and quite tight. The chance of the index dropping much still appears limited.
The closing candlestick on Friday pointed to bearishness for Monday.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
2160 is very light support.
2150 is 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.
Stock Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum has fallen to the point where it is neutral.
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 August 1. That sell signal gained strength on Friday but in general it is trading sideways as it continues to keep a slight negative bias.
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 more sideways than up or down.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving lower indicating that higher prices are not about to happen.
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 has a weak up 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 has a weak down signal in place.
Stock Market Outlook for Tomorrow – August 22 2016
For Monday the S&P looks set to start the day weak and probably lower following Friday’s rally back. The rally on Friday failed to turn the market positive and with a number of uncertainties this week including the Jackson Hole annual banking conference, investors may sit on the sidelines. This will keep volume low and volatility should remain low.
Any dip on Monday however should see buyers come in and a close either slightly positive or slightly negative is expected. Overall the underlying direction is still higher but continued weakness should remain with the market to start the week.
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