On Monday weakness was expected, especially in the morning. Friday saw a very strong rally built primarily on the “hope” or “understanding” that changes were coming to relax many of the Dodd-Frank regulations. Banks in particular did very well on Friday. Today a lot of banks stocks gave back some of those gains as investors waited for more “news” on the subject. By the close the typical, buy the late day dip, moved the markets back toward their opening values, basically lifting them off their intraday lows.
S&P Index Close
The S&P index ended the day down just 4.86 points to 2292.56
Dow Jones Index Close
The Dow Jones ended down 19.04 to close at 20,052.42
NASDAQ Index Close
The NASDAQ closed down just 3.21 points to end the day at 5663.55
Stock Market Outlook
Stock Market Outlook review of Monday Feb 6 2017
Chart Comments At The Close:
On Monday the S&P closed down just slightly below the Upper Bollinger Band. The closing candlestick was neutral for Tuesday. You can see that the possible Bollinger Bands Squeeze I wrote about earlier last week is still in play and the Lower Bollinger Band is still clinging to the 50 day moving average which often is a bearish signal for the following day.
The 2260 level continues to hold up well but better support is at 2250 which is also light support and won’t hold a determine sell-off up by much more than a few hours.
All the moving average are continuing to rise.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is still positive but is back to moving sideways.
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 Jan 30 2017. The sell signal is much weaker heading into Tuesday.
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 into overbought readings.
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.
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 continues to move sideways which indicates not a lot of change in prices is expected at present.
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 falling back from an overbought reading.
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 for Tuesday.
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 – Tuesday Feb 7 2017
The technical outlook is still more positive and stronger heading into Tuesday. MACD is still flashing a weak sell signal but the Fast Stochastic has now issued an up signal to join most of the other technical indicators. In general the positive signals are much more evident than negative signals.
Even if Tuesday should end up being negative, the valuation in the S&P should not fall by much. Overall though, the signals are strong enough on their own merit to point to a better day and a higher close on Tuesday. We could and probably will see some further weakness and a lot of sideways action, but on Tuesday the market should be able to close higher, even if by only a small amount.
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