Interest rate jitters again got the better of investors on Thursday. The S&P gave back a 30 point rally. The Dow was up well over 300 points but managed to hold onto a 164 point advance. Much of the strength in the Dow came from United Technologies Stock (UTX) which was up on “tales” of breaking the company up for various sales which is doubtful it would ever happen but investors seemed to like the prospects. Caterpillar was also up 2.34% as was 3M, McDonalds, Home Depot, Boeing, General Electric and even Walmart Stock which rose 1.37% to close at $92.77. The NASDAQ gave back the entire rally of 70 points and closed down 8 points on the day.
Closing Statistics for Thu Feb 22 2018
S&P 500 Index Close
The S&P index ended up 2.63 to 2703.96
Dow Jones Index Close
The Dow Jones ended up 164.70 to 24,962.48
NASDAQ Index Close
The NASDAQ closed down 8.14 to 7210.09
Stock Market Outlook – Review of Thu Feb 22 2018
Chart Comments At The Close:
The SPX closed below the 50 period moving average and near the 2700 level which has support for a potential rebound. The closing candlestick is bearish but often we see a reversal from this type of candlestick as well.
The 100 and 200 are still climbing but the 50 day is moving sideways. The 21 day is on top of the 50 day. A move below will issue a sell signal. The Lower Bollinger Band is down to the 200 day moving average. A move below it will also issue a sell signal. The Upper Bollinger Band is continuing to fall. The overall chart is bearish but there are some signals that indicate weakness may not be as widespread. More on this in the outlook below.
Stock Market Outlook review of Thu Feb 22 2018
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 sell signal on Jan 31. The sell signal continued to lose strength on Friday but is still in effect.
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 moving lower. It is ready to turn negative.
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 very weak down signal still in place.
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 falling back.
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. With the Rate Of Change prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline. On Thursday the rate of change is negative and falling which indicates lower prices are expected.
Support Levels To Be Aware Of:
2700 is now support.
2675 is light support.
2650 is light support and 2620 is also light support.
There is good support at the 2550 level from where the market bounced back from the recent correction.
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 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Fri Feb 23 2018
The S&P chart is bearish but the major moving averages are still climbing which indicates that the market is not all doom and gloom. Momentum is still rising and MACD now has just a very weak sell signal in place. It was disappointing to see the Slow Stochastic issue a new sell signal today. So technically the market is weak but sometimes the weakness after retesting important support points, such as we saw on Wednesday and again on Thursday at the 2700 level, can be enough to get a rally back on its feet.
The economic indicators are very good for the country. It is fear of the unknown effects of rising interest rates that worry investors. Rising interest rates can be a strong unknown entity and that is holding investors back.
Technically Friday looks again like another day when rallies will fail. However there is an underlying strength that is hanging on and that might just get us a positive close to end the week. Even a small one might set the markets up for March to start off better than February has. So for Friday I have to take into account the technical indicators and call it sideways with a bias to the downside. Fingers crossed though, we see a bit more strength.
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