A jump in oil prices by 3 percent was enough to get investors buying in the last hour of trading on Wednesday. West Texas Intermediate crude bounced to $40.83 in the futures following statistics that showed a drop in gasoline stockpiles.
This helped boost the energy sector which saw stocks like Exxon Mobil rise 45 cents to $87.49. The rise in oil prices also helped the financial sector including stocks like Goldman Sachs Group which rose 1.46% to $158.34 on Wednesday.
On Thursday morning before markets open investors get the Weekly Initial Unemployment Insurance Claims report which should help shed some light on what the July non-farm payroll numbers may be like on Friday.
S&P Index Close
The S&P index waffled throughout much of the day and fell to 2152.56 at the open. By the close, a short burst of buying shot the SPX to a close of 2163.79, up 6.76 for the day.
Dow Jones Index Close
The Dow closed higher by 41.23 points to close at 18,355.00.
NASDAQ Index Close
The NASDAQ which had made a new 52 week high on Monday, recovered half of Tuesday’s loss, moving up 22 points to close at 5159.74.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Aug 3 2016
Stock Market Outlook: Chart Comments:
You can see in the chart above that while the S&P has been trending sideways for more than two weeks now, there is a slightly move lower underway. Today the S&P had a small late day rally but still closed at the 20 day simple moving average (SMA) which continues the trend lower for the index.
The Bollinger Bands Squeeze is underway and presently, the Upper Bollinger Band is turning down which indicates the squeeze should send the SPX 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 turned negative on Tuesday and moved lower today.
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 stronger today despite the late day rally.
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 back trying to rise.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and also trying to rise.
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 down signal in place for Thursday.
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 also has a down signal in place.
Stock Market Outlook for Tomorrow – August 4 2016
For Thursday August 4, the technical indicators have not changed their outlook despite the late day rally today. The outlook remains weak for stocks.
With markets closing at their intraday highs on Wednesday, we should see some weakness to start the day on Thursday. This is because it is common when the market closes at its highs, it opens a bit lower the follow day. That dip, if it does occur at the start of trading on Thursday will be an opportunity for setting up more trades as it looks like stocks may try to move somewhat higher again on Thursday head of the non-farm payroll numbers on Friday.
Despite the technical indicators pointing to weakness for stocks for Thursday, we should still see stocks move higher ahead of the July jobs reports due out on Thursday before the markets open. As well stats from the UK show their economy is shrinking at the fastest pace since 2009. This will probably be enough to push the Bank of England to lower interest rates on Thursday, which should excite a lot of investors and push them back toward equities.
Therefore be aware that while the outlook for stocks is still weak and lower, investors may very well buy the market ahead of the non-farm payroll numbers due out on Friday.
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