Friday saw the markets close at their highs of the day following jobs numbers that stunned many analysts. With a gain of 255,000 non-farm jobs in July, far above the expected 180,000 investors jumped back into stocks. Hourly wages increased by 8 cents for an annualized pace of 2.6 percent. The average work week rose to 34.5 hours. The unemployment rate was still at 4.9 percent as more unemployed returned to look for jobs. The unemployment rate is now sitting at “generational lows”. The July numbers showed that job gains were broad-based. These are the types of numbers the Fed watches and July’s numbers could increase the likelihood of a September rate increase rather than one in December.
S&P Index Close
The S&P index rose 18.62 points to close at 2182.87 on Friday.
Dow Jones Index Close
The Dow closed higher by 191.48 points to 18,543.53.
NASDAQ Index Close
The NASDAQ rose 54.87 points to close at 5221.12.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Aug 5 2016
Stock Market Outlook: Chart Comments:
The market jumped on Friday and pushed to the Upper Bollinger Band. The Bollinger Bands Squeeze is well underway, but it now appears the market may be pushed higher as the squeeze unfolds.
All the major moving averages are rising.
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.
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 back positive on Friday and is starting to rise.
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 weakened on Friday.
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 rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and rising.
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 aan up signal in place for Monday.
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 an up signal in place for Monday and is very overbought.
Stock Market Outlook for Tomorrow – August 8 2016
Following better than expected July non-farm payroll numbers, investors bought the market and sent the S&P to another new high. A number of indicators are showing the market as overbought, but there is definitely room to the upside for the market to move higher.
Stocks closed at the day’s high on Friday which often sets up the following day for the market to move lower at the open. I would expect to see stocks weaken at the start of trading on Monday but then move higher and close still higher than Friday’s close.
Overall the bias is to the upside for Monday.
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