Anxiety of what a Trump Presidency will bring to the economy, is keeping the market under wraps. The tight trading range held the S&P again today but the drop in the Dow Jones at one point was triple digits.
Tomorrow we get a new President and then the next 100 days will be significant for the present rally. While many investors are holding stock and refusing to sell at present levels, the fifth straight day of declines in the Dow had many analysts today warning that, they are right, and the rally is coming to an end. It won’t be long before investors get to find out if so many analysts predicting a drop in stocks, are right.
Friday Jan 20 should be an exciting day for stocks with a new President being sworn in and rhetoric that indicates the nation will be moving in a new direction that is fundamentally different from the Obama administration. At the same time there are growing signs that the downside is building strength and stocks must very soon prove they can move higher or risk falling lower. Friday may very well be a day not to miss.
S&P Index Close
The S&P index ended the day down 8.20 points to close at 2263.69 but intraday the SPX broke through the 2260 level for a brief period.
Dow Jones Index Close
The Dow Jones ended lower by 72.32 after recovering from a triple digit loss. The Dow closed at 19,732.40.
NASDAQ Index Close
The NASDAQ closed down 15.57 points almost wiping out all of yesterday’s gains. It ended the day at 5540.08.
Stock Market Outlook
Stock Market Outlook review of Jan 19 2017
Chart Comments At The Close:
The Bollinger Bands Squeeze is continuing without much in the way of signs to advise whether the squeeze will end with stocks moving higher or lower. For now the trend is still sideways. The tight trading range is plain enough as the market is staying within the 2260 to 2270 levels. Dips are continuing to be bought into such as we saw today when the index briefly dipped below 2260.
The S&P closed below the 21 day moving average for the first time since Jan 3.
A break of this tight 10 point trading range is expected this week and I am still anticipating the move to be up but there are growing signals it could be lower.
All the main moving averages are continuing to climb and the 50 day is quickly expanding the distance between it and the 100 day. This is usually a bullish sign.
Support Levels To Be Aware Of:
Light support is at the 2250 level. There is also light support at 2195 but better support is at 2180 and then 2150.
Stock Market Outlook: Technical Indicators:
Stock Market Outlook technical review of Jan 19 2017
Momentum: For momentum I use a 10 period when studying market direction. Momentum today slipped into negative signals and is starting to move lower.
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 is starting to strengthen today.
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 but falling back.
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 now signaling down from overbought readings.
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 pretty much neutral and showing signs it may fall into negative readings.
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. Readings are now below 50 and moving toward oversold.
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 is signaling down from overbought.
Stock Market Outlook for Tomorrow – Friday Jan 20 2017
For Friday Jan 20 2017, inauguration day, the signals have changed. Only one signal is positive and it is only slightly so. The other indicators are all negative and readings to the downside are growing in strength.
Technical readings aside the S&P is not far from its all-time highs and volume on down days has remained light in relation to past sell-offs. There are other fundamental signals as well that still support the outlook that stocks will break back higher shortly.
However the readings are turning overwhelmingly negative. We could still see a bounce back in stocks on Friday as we head into the swearing in of a new President and a new cabinet. There are also some signals that the market is tiring of the see-saw moves we have seen. Volume has been steadily eroding but sellers still refuse to unload shares. Normally this means a break to the upside should happen.
We cannot however ignore the technical signals which are advising that more downside may lie ahead for stocks. Friday could therefore be negative. My personal outlook is that stocks should bounce on Friday, but the technical indicators do not agree. In the past when my personal outlook for the following day failed to agree with the technical indicators, it has been rare when I was right and the technical indicators wrong. Therefore Friday looks to be another negative day.
Caution is still advisable until we get a clear break of this tight trading range on the S&P.
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