On Thursday Feb 23 2017, it was a day of declines in a handful of stocks that have seen large gains since the rally commenced in early November with the election of Donald Trump to the Presidency.
These included Caterpillar stock which lost 3%, Mosaic which was down 4%, United Rentals down 5.5%, US Steel down 8%, AK Steel down 7.62% and Nucor Corp down 3.7%.
Other decliners included L Brands which collapsed an incredible 15.8%, Alcoa fell 6.2%, NVIDIA down 9.2%, Jack in the Box down 6.6%, TSLA down 6.4%, Office Depot down 5.4%, Urban Outfitters down 5.1%, Sears Holdings down 5% to mention some of the more notable names.
So on Thursday what we saw was the broad market not advancing and many stocks actually giving back much of the rally gains. So with the Dow Jones up for yet a 10th record close, the market showed us on Thursday that the rally is narrowing.
Let’s look at the closings on Thursday and then take a technical overview.
S&P Index Close
The S&P index ended the day up just 0.99 points to close at 2363.81.
Today marked the 54th day of the S&P not moving 1% either up or down, a new record.
Dow Jones Index Close
The Dow Jones ended up 34.72 points to close at 20,810.32 another record close and a new record winning streak.
NASDAQ Index Close
The NASDAQ closed down 25.12 points to end the day at 5,835.51.
Stock Market Outlook
Stock Market Outlook review of Feb 23 2017
Chart Comments At The Close:
On Thursday the S&P slipped below or inside the Upper Bollinger Band and left behind a possible reversal candlestick. This sometimes takes a day or two to play out so whether we see a dip on Friday or one on Monday, it’s hard to be certain.
The Lower Bollinger Band which fell below the 50 day moving average has stopped its descent though and is starting 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 is moving sideways, not falling or 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 falling. 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 down signal in place 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 and falling which normally indicates lower prices are to be expected shortly.
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 pulling back. It is still at readings that almost always signal a pullback or dip 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 down signal in place and is also 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 – Friday Feb 24 2017
The technical indicators on Thursday are still very overbought but most of the overbought signals are turning lower.
Momentum is still quite strong despite so many “big” names being sold on Thursday, but it is now moving sideways.
The Relative Strength Index (RSI) is still overbought but it is turning down.
None of this means the market has to take a large dip but we should see choppiness and there is a rising case for the market closing lower on Friday. Much of the weakness is the talk about a possible border tax for goods not made in America coming into the country, which for now has no concrete information available. This pushed a lot of stocks lower including many retail stocks as a border tax is seen by many in retail as a sales killer of sorts since so much product sold is from outside the USA.
For Friday I am not expecting anything on the possible border tax to get any kind of clarity and with the selling in so many big name stocks taking place, there is probably a bit more weakness and perhaps a speed bump for Friday.
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