Thursday saw a weak morning and some negative moments but with Treasury yields pulling back many stocks seemed to find their footing. Technology shares tried to stage a bit of a rebound and financial stocks turned back higher in anticipation of the Fed’s stress test results. However news of Amazon’s surprise purchase of PillPack punished drug stocks from Walgreen’s to CVS to McKesson to even the retailers like Walmart and Target which was rumored to have been interested in buying the company. The close was positive with better gains by many stocks.
Stock Market Outlook Chart Comments At The Close on Thu Jun 28 2018
The S&P slipped below the 100 day moving average on Thursday but then bounced off the 100 day and moved back up. This keeps the 2700 level intact as a major support level. The close saw the index at the 50 day moving average and left behind a bullish candlestick. The 21 and 50 day moving averages are turning lower but the 100 and 200 are continuing to rise.
The chart remains bearish but there are enough bullish signs for Friday that the index should move higher.
Stock Market Outlook review of Thu Jun 28 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative but starting to rise.
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 a down signal on Jun 19. It was slightly weaker on Thursday.
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 but rising after reaching oversold levels.
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 is signaling down but is oversold enough for another move back higher on Friday.
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 is often the first indicator to show an overbought or oversold signal. The RSI signal is deeply oversold and starting to bounce.
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. The rate of change signal is neutral on the market direction for Friday.
Support Levels To Be Aware Of:
2745 to 2750 was light support
2725 is light support.
2700 is support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
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 Jun 29 2018
For Friday the Stock Market Outlook is for a higher close. The open should be stronger thanks to the bank stress test results and the announcements of dividend increases and stock buy backs from the banks. Investors might also be tempted to step into a couple of the retail names that were lower on Thursday thanks to Amazon. After the initial open we could then see a dip mid-morning but then a move back up into the lunch hour.
The technical indicators are still negative but the majority are showing signs of wanting to turn back up.
Friday should end higher for the indexes although it will be choppy and there could be some dips.
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