On Wednesday Feb 22 2017, stocks got a bit choppy. This was expected as outlined in yesterday’s Market Direction Outlook. With stocks sitting at new highs and well within reach of some still lofty goals such as 21,000 for the Dow Jones, seeing some money being taken out of stocks is not a big surprise. Many investors are trimming back but overall stocks have put in a terrific performance over the past 4 months.
The Dow Jones has seen the best string of up days in 50 years and the S&P has not had a move greater than 1% either up or down in 53 days which is a record.
S&P Index Close
The S&P index ended the day down 2.56 points to close at 2362.82
Dow Jones Index Close
The Dow Jones ended up 32.60 points to close at 20,776.50 which is another record high close
NASDAQ Index Close
The NASDAQ closed down 5.32 points to end the day at 5,860.63
Stock Market Outlook
Stock Market Outlook review of Feb 22 2017
Chart Comments At The Close:
On Wednesday the S&P closed at the Upper Bollinger Band again, which is a bullish signal and an overbought signal. However today the closing candlestick was neutral in the outlook for Thursday. This is also reflected in the two stochastic indicators which you can see in the technical chart beneath the S&P chart.
The Lower Bollinger Band which fell below the 50 day moving average has stopped its descent though and looks like it might try to turn up which would indicate a possible larger dip shortly. This needs to be watched.
The major moving averages are all still climbing which is bullish.
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 continues 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 a neutral signal in place and is extremely 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 rising indicating higher prices are still 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 at readings that almost always signal a pullback should be expected at any time.
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 a neutral in place and is also extremely overbought.
Support Levels To Be Aware Of:
The market has light support at the 2250 level. There is also light support at 2195 but better support is at 2180 and then 2150.
Stock Market Outlook for Tomorrow – Thursday Feb 23 2017
The technical indicators on Wednesday are extremely overbought. After days of pushing and clawing higher, the market may be ready for a bit of a rest. There are definite signals from a number of indicators to support a stalling. The two stochastic indicators are now neutral and extremely overbought. The Relative Strength Index (RSI) is at readings that almost always foretell a larger dip to work out the overbought signals.
This doesn’t mean the market has to drop. It could just churn away at these levels, staying choppy and working out the overbought condition without much of a drop. Overall investors are just trimming back positions with the market at present levels but there are no signals that a bigger move lower is coming. Instead the signals are still to the upside.
So for Thursday we should see more weakness as the overbought condition continues to weigh on stocks. Overall though the bias is holding to the upside.
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