My outlook for Thursday was certainly wrong. I had expected the market rally to begin to stall and there was even the possibility of a slightly negative close. That didn’t happen and instead stocks pushed higher. All three indexes made new all-time highs once again.
S&P 500 Index Close
The S&P index ended up 14.33 to 2552.07
Dow Jones Index Close
The Dow Jones ended up 113.75 to 22,775.39
NASDAQ Index Close
The NASDAQ closed up 50.73 to 6585.36
Stock Market Outlook
Stock Market Outlook review of Oct 5 2017
Chart Comments At The Close:
The S&P onThursday pushed above the Upper Bollinger Band which is a strong indication of just how overbought the market has become. With many stocks now frothy, investors are starting to forget looking for dips to get into stocks and jumping in, afraid they will miss the ongoing rally.
The 21 day is moving higher and all three major moving averages, the 50, 100 and 200 are following.
The Upper Bollinger Band is rising, often an indication there is still more upside. Eventually though the overbought condition will win out and the market will turn sideways but not just yet.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and still 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 on Aug 31. The buy signal was stronger again 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 is positive, overbought and still rising.
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 extremely overbought. It issued a down signal at the close on Wednesday. Remember that it can take more than a day for the signal to come through but it is the first down signal from the Slow Stochastic since Sep 15. We could begin to see some weakness by Monday.
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 showing the market is very 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 back climbing and signaling higher prices are ahead.
Support Levels To Be Aware Of:
The S&P has light support at 2480. It has light support at 2450 and good support at 2425. There is also light support at 2400, 2380, 2350 and 2300.
Stock Market Outlook for Tomorrow – Friday Oct 6 2017
Thursday saw strong gains from all the indexes. This was almost a “pent up” demand rally during the day and often signals the beginning of a stalling as today’s big climbs in all 3 indexes places them solidly in overbought territory.
For Friday, we get the non-farm payroll numbers from September.
Unless there is a “big” surprise in those numbers, the market is probably not going to react much when the numbers are released.
The technical indicators are strongly bullish but also very overbought. The Slow Stochastic has a down signal in place and that could take a couple of days before it catches up to the markets.
The chance the markets can just keep climbing against a strong overbought condition is slim.
Friday should see a choppier session but another positive close. Next week is when we could see some negative movements, even if only intraday. For now though, Friday looks higher for the S&P.
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