Political factors had a major hold on markets on Tuesday Jan 17 2017, for the first day back after the Martin Luther King Jr Holiday.
President-elect Trump comments on the US dollar being too strong sent the dollar lower while British Prime Minister Theresa May indicated that Britain would be quitting the European Union single market when the country leaves the EU.
Both of these events helped to push gold higher and pressured stocks lower on Tuesday.
S&P Index Close
The S&P index ended the day down 6.76 to close at 2267.89
Dow Jones Index
The Dow Jones ended lower by 58.96 to close at 19,826.77
NASDAQ Index Close
The NASDAQ closed down 35.39 to 5538.73
Stock Market Outlook
Stock Market Outlook review of Jan 17 2017
Chart Comments At The Close:
The Bollinger Bands Squeeze is continuing on Tuesday at the close. There are no signs to advise which way the Bollinger Bands Squeeze will end. It is still trending sideways.
Meanwhile the market is stuck in a tight range trading primarily between the 2260 and 2270 valuations. This should break sometime this week. A move down to 2250 could see buyers step in, or sellers could decide to sell which would push the S&P to 2225.
The S&P closed the day just above the 21 day moving average but the candlestick was bearish for Wednesday.
All the main moving averages are continuing to climb.
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: Technical Indicators:
Stock Market Outlook – Technical review for Jan 17 2017
Momentum: For momentum I use a 10 period when studying market direction. Momentum is still positive and is trying to move higher.
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 Dec 23 2016. The sell signal had been losing strength all last week but for Tuesday it was still steady.
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 moving sideways.
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 changed its signal from up to down to neutral.
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 took a bit of a bounce today.
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 has turned negative and is moving lower.
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 also changed its signal from up to down to neutral.
Stock Market Outlook for Tomorrow – Wednesday Jan 18 2017
For Wednesday Jan 18 2017, the technical indicators are tilting toward more weakness. MACD is still holding a sell signal, both stochastic indicators turned to down signals and the Relative Strength Index (RSI) turned to a negative reading. That leaves Momentum still stuck trying to rise, the Ultimate Oscillator still positive and the rate of change which bounced which often indicates a direction change is coming shortly. So we have 4 indicators moving lower and 3 still trying to stay positive.
Overall then we are still showing a signal of weakness and once more steady sideways action. The underlying current for stocks is still up but weaker.
With more and more analysts jumping onto the “Trump rally ending” bandwagon, we have to wonder if this many analysts can be right. For now I would think staying cautious is advisable but overall the outlook continued to hold a bias up and markets are well within easy reach of setting new highs. Normally when new highs are going to be lost, the market will push to them, stumble around for a couple of days and then fall back down.
Instead we are seeing the markets hang close to their highs and dips continue to be bought into. For Wednesday don’t be surprised if the markets move back up slightly despite the 4 to 3 lower technical outlook.
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