I had expected more weakness Thursday morning following Wednesday’s late day sell-off. Investors though had other plans. While I thought most would want to think through the Fed comments from the Fed rate increase, Wednesday afternoon, investors instead took the dip on Wednesday afternoon as a chance to jump into stocks for another push higher. A lot of investors have missed this rally and dips, such as the one on Wednesday afternoon into the close, are being used by investors to get into some positions to try to enjoy some of the rally’s results.
This is a true bull rally with investors at times showing almost desperation to jump into trades in the hopes there is still more to the rally.
Thursday saw gold trounced severely hitting a ten and a half month low as the US dollar reached a 14 year high. This also pressured oil which was already under pressure due to rumors that some countries were not complying with the recent agreement on production cuts. It was banks that primarily led the Dow higher to brush against 20,000 early in the day before closing below it by 150 points.
S&P Index Close
The S&P index ended the day up 8.75 to close at 2,262.03. It did not recover all of Wednesday’s losses.
Dow Jones Index
The Dow Jones ended the day up 59.71 to 19,852.24 but also not recovering all of Wednesday’s 118.68 point drop.
NASDAQ Index Close
The NASDAQ rose 20.18 points to close at 5456.85 and coming closest to recovering Wednesday’s 27.16 point loss.
Stock Market Outlook
Stock Market Outlook Review Of Dec 15 2016
Chart Comments At The Close:
The S&P moved higher in the morning and then pulled back. It failed to hold the 2265 valuation but slipped beneath it. The closing candlestick on Thursday tends to be bearish for the following day.
The S&P is still well above all the major moving averages but it is now below the Upper Bollinger Band. All the major moving averages are still rising with the 50 and 100 day moving averages within a close proximity to one another. This will be bearish if the 50 day falls below the 100 day.
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 Dec 15 2016
Momentum: For momentum I use a 10 period when studying market direction. Momentum is still positive and on Thursday it moved higher.
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. This week it has been losing strength and that trend continued again on Thursday.
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 still falling despite today’s rebound.
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 positive and rising.
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 16 2016
I had expected a negative close on Thursday and perhaps it would have been better if we had experienced one. That could have set Friday up for strong gains. Instead we saw a snap back rally which could now set Friday up for some weakness.
For Friday the technical indicators are still biased to the upside but there is weakness showing. Once again both stochastic indicators are signaling down and are still very overbought.
All the other indicators are still positive but not actually gaining strength.
Friday should see some weakness again for stocks, probably in the morning. From there I would expect a move higher or an attempt at a move to 2270. It is monthly options expiration on Friday and volumes should be high. That can often assist in increasing volatility but also pushing the indexes higher into the close. If there is a negative close on Friday I plan to use it for more trade setups as the overall underlying bias at present for the indexes is up. I am expecting the Dow to break 20,000 by Monday or Tuesday at the latest.
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