Wednesday’s market was once again all about the Fed. It wasn’t so much the interest rate rise for December that caused concern among investors. Instead it was the pace with which the Fed indicated more rate rises would come. The next rise could be as early as March 2017. This sent investors into a selling mood as the afternoon stretched into the close.
The Fed’s rate raise and the more hawkish tone sent bonds tumbling. The 2 year Treasuries rose to their highest level since August 2009. The three-year yields hit their highest level since May 2010. 5 year yields rose to their highest level since May 2011. Bond yields pressured stocks lower into the close while the dollar rose 1 percent against a basket of six major currencies.
S&P Index Close
The S&P index ended the day with a loss of 18.44 to close at 2,253.28. This was a loss of 0.81% for the largest loss among the three major indexes.
Dow Jones Index
The Dow Jones ended the day with a loss of 118.68 points to close at 19,792.53.
NASDAQ Index Close
The NASDAQ fell 0.50% to close down 27.16 points at 5436.67.
Stock Market Outlook
Stock Market Outlook review for Dec 14 2015
Chart Comments At The Close:
The S&P intraday made another new high of 2276.20 before selling lower following the Fed announcement. The initial reaction had been up making the new high but then the market slipped and broke to the 2250 level shortly after 3:00 PM. A second rally into the close failed and the market slipped a second time closing at 2253.28. This left behind a bearish candlestick for Thursday. It also saw the S&P close below the Upper Bollinger Band. All the major moving averages are continuing to rise and the 50 day and 100 day moving averages are very close to one another. The 50 day is nearing the point where it could fall below the 100 day, which would be a sell signal on the rally.
Support Levels To Be Aware Of:
There is only light support at 2200. There is also light support at 2195 but better support is at 2180 and then 2150.
Stock Market Outlook: Technical Indicators:
Stock Market Outlook Technical Review of Dec 14 2016
Momentum: For momentum I use a 10 period when studying market direction. Momentum is still very positive but it is falling.
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 Nov 9. The buy signal had been losing strength a couple of weeks ago but with last week’s rally, it was gaining strength again. Today MACD is starting to weaken again.
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 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 signaling down for stocks and is overbought.
Rate of Change: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. The rate of change signal is positive but pulling back. The signal though remains strong.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. It is overbought and falling.
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 use for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic is signaling down and is also overbought.
Stock Market Outlook for Tomorrow – Dec 15 2016
The technical indicators are still biased to the upside but they are all showing weakness. The two stochastic indicators are both signaling down and are still very overbought. The Relative Strength Index (RSI) is also signaling down. The other indicators are all positive but are pulling back.
Thursday should see stocks weaker following the Fed’s comments concerning 2017. While the underlying trend higher is still intact, it will take a day or two for investors to decide whether they want to pick up equities and push them still higher or take their profits and wait for another signal to buy before moving back into stocks.
For Thursday we should see a negative close on the day.
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