Investors on Tuesday turned their focus back to global growth concerns. This renewed concerns was sparked by oil collapsing below $40 which placed oil back into a bear market. While the selling in North America was not overly dramatic it actually started in Japan and then Europe, where stocks fell broadly. This weakened the outlook for stocks for the opening on Tuesday. The sell-off was also partly due to the overbought condition of the market itself.
Meanwhile consumer purchases rose more than expected in June as investors returned to shopping. Income growth among consumers however was poor, rising less than 0.2 percent which means consumers are tapping into recent savings to continue to make purchases.
All of this weighed on investors on Tuesday.
S&P Index Close
The S&P index on Tuesday pulled back from a 52 week high, closing down 13.81 points to 2157.03, off the lows for the day which saw the S&P reach 2147.58.
Dow Jones Index Close
The Dow closed lower by 90.74 points to 18,313.77.
NASDAQ Index Close
The NASDAQ which had made a new 52 week high on Monday, fell back 46.46 points for a loss of 0.9% to close at 5137.73.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Aug 2 2016
Stock Market Outlook: Chart Comments:
The S&P had been moving sideways for 12 trading days fighting to move up and to break through an overbought environment. The closing candlesticks for many days had been bearish, pointing to the market pulling back.
Today finally stocks pulled back and pushed below 2150 before recovering. The drop pushed the S&P below the 20 day simple moving average (SMA) but the rally back, placed the index above the 20 day by the close.
‘Still though, this is bearish and the closing candlestick is also bearish for Tuesday.
.The Bollinger Bands Squeeze is underway and it could see stocks head lower.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
2160 was 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 turned negative on Tuesday and moved lower.
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 was confirmed 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 but falling quickly.
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 has a strong down signal in place.
Stock Market Outlook for Tomorrow – August 3 2016
The technical indicators changed yesterday (Aug 1) to weakness and down. Today’s action confirmed that outlook. The down signal or weakness the market is presently experiencing, should continue Wednesday.
The overall outlook from the technical indicator is also of weakness for stocks. A number of new sell signals have emerged and the Bollinger Bands Squeeze at present looks set to push the index lower.
For Wednesday watch for stocks to remains weak but not fall too far, ahead of Friday’s unemployment report. However until the report is released, stocks will remain turbulent and keep pressuring the market to move lower.
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