Stock Market Outlook for Feb 16 2017 – Extremely Overbought But Still Higher

Stock Market Outlook Extremely overboughtOn Wednesday I has expected to see a bit more weakness, but any even small stalling of the index in the morning brought in buyers. The S&P moved higher throughout the day and closed just off the highs during the day. Enthusiasm for stock  buying continued unabated on Wednesday and all three indexes closed once again at all-time highs.

Whereas in the past, any hawkish comments on interest rates from the Fed would have sunk stocks, today’s hawkish tone seemed to push stocks higher as the Fed gave every indication that March was the likely next target for another interest rate increase.

S&P Index Close

The S&P index ended the day up half a percent adding 11.67 points to close at 2349.25

Dow Jones Index Close

The Dow Jones ended up 107.45 points to close at 20,611.86 gaining another half a percent

NASDAQ Index Close

The NASDAQ closed up 36.87 points to end the day higher by 0.64% and closing at 5,819.44

Stock Market Outlook

Stock Market Outlook review of Feb 15 2017

Stock Market Outlook review of Feb 15 2017

Chart Comments At The Close:

On Wednesday the S&P closed above the Upper Bollinger Band for the fourth day, which is bullish but also a signal of an overbought market. The closing candlestick was bullish for Thursday. The Lower Bollinger Band is quickly falling lower and the Upper Bollinger Band is pushing higher. The 21 day moving average has clearly turned up and the 3 major moving averages, 50, 100 and 200 day, are all continuing to advance.

A move inside the Upper Bollinger Band by the S&P should be expected at any time.

Stock Market Outlook: Technical Indicators:

Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and rising.

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 Feb 10 2017. The buy signal continued to gain strength.

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. It is overbought.

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 an up signal in place and is very 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 and continues to rise, signaling higher prices lie ahead.

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.  RSI is extremely overbought and continuing to rise.

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 has an up signal in place and is also very overbought.

Support Levels To Be Aware Of:

The market has been trying to build support at the 2250 level.  There is light support at 2195 but better support is at 2180 and then 2150.

 Stock Market Outlook for Tomorrow – Thursday Feb 16 2017

The technical indicators on Wednesday Feb 15 2017 ended the day showing signs of extreme overbought conditions. Three technical indicators, the Slow Stochastic, Fast Stochastic and Relative Strength Index (RSI) are extremely overbought and it is rare to see the Relative Strength Index (RSI) is now at 93.85 which is an extremely overbought signal.

I had expected some weakness on Wednesday to help relieve the overbought pressure but that did not happen. When the markets in the morning moved a bit sideways, investors jumped in as if the index had already dipped and once more bought stocks.

This is bullish in nature but often a signal that the market rally needs to take a breather.

While I would anticipate some weakness to appear by Thursday or Friday, the outlook is still higher for stocks on Thursday.


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