What Happened On Fri Feb 2 2018
On Friday, January non-farm payroll numbers spooked investors. The report showed wage gains which would mean inflationary pressures and which investors felt would also mean more interest rate hikes from the Federal Reserve. The selling started at the open and was relentless all day. Buyers failed to show up and stocks kept tumbling. As more investors joined in the selling, indexes continued to plunge until by the end of the day technical damage had been inflicted on the indexes leaving them with the worst sell-off since 2016.
Closing Statistics for Fri Feb 2 2018
S&P 500 Index Close
The S&P index ended down 59.85 to 2762.12 for a loss of 2.12%
Dow Jones Index Close
The Dow Jones ended down 665.75 to 25,520.96 for a loss of 2.54%
NASDAQ Index Close
The NASDAQ closed down 144.92 to 7240.95 for a loss of 1.96%
Stock Market Outlook – Review of Fri Feb 2 2018
Chart Comments At The Close:
The plunge on Friday left behind a long bearish candlestick which often signals a bounce before more selling resumes. The index is below the 21 day moving average. The Lower Bollinger Band has now moved above the 50 day moving average which is bearish. The Upper Bollinger Band is falling and we should see a Bollinger Bands Squeeze next week. The 21 day moving average is turning down which is bearish. The 50, 100 and 200 day moving averages are still climbing which is bullish. The S&P looks set to test for support at the 50 day moving average which is the 2700 to 2710 level. There is no actual support until 2675 and it is light support.
Stock Market Outlook review of Fri Feb 2 2018
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and 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 sell signal on Jan 31. On Feb 2 the sell signal was stronger.
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 signal is negative 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 has a down signal in place for the fourth day.
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. The RSI signal is moving lower nearing overbought readings. There is however still room to fall lower before it is deeply oversold.
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 moving lower. It is oversold and entering levels from which we normally see a bounce attempt in the index.
Support Levels To Be Aware Of:
2700-2710 is at present the 50 day moving average. It is not support but often these technical indicators can slow or reverse a sell-off.
2675 and 2620 are light support.
There is good support at the 2550 level.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be almost 15%.
Stock Market Outlook for Tomorrow – Monday Feb 5 2018
On Friday all 3 major indexes closed at their lows of the day. Often that sparks a rebound attempt. However after all the selling on Friday, I would not expect a rebound attempt to last. Instead we should continue to see selling on Monday. The chance of the S&P reaching the 50 day moving average by Tuesday is high. The selling could last into Wednesday when I would expect a rebound attempt again. Caution is advised until the market direction is clearer.
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