The Fed minutes from December were released on Wednesday afternoon. Despite a more hawkish tone and more clarity on the chance of 3 interest rate increases in 2017 with more rate increases expected to follow in 2018 and 2019, the stock market took the news in stride and moved higher closing in on all-time highs.
The Fed minutes show an expectation that if President-elect Trump’s plans for tax cuts, infrastructure spending and deregulation come true, the economy should grow more quickly.
The Fed minutes sent Treasury yields lower and the dollar which reached a 14 year high yesterday, fell back today.
Oil rose on expectations that efforts to curb production will decrease inventories, particularly within the United States. Oil closed at $53.26 (WTI) up 1.78 percent.
Gold meanwhile, rose to a four week high to $1163.24 thanks to the dollar’s decline and increase demand for gold from China and India.
S&P Index Close
The S&P index ended the day up 12.92 to 2270.75 for a gain of 0.57%.
Dow Jones Index
The Dow Jones ended the day up 60.40 to close at 19,942.16.
NASDAQ Index Close
The NASDAQ closed up 0.88% for the biggest gain among the three indexes. It rose 47.92 to close at 5,477.01.
Stock Market Outlook
Stock Market Outlook review of Jan 4 2017
Chart Comments At The Close:
The S&P is sitting within a few points of making another new all-time high.
Yesterday the index pushed above the 20 day moving average and today it moved still higher, leaving all the major moving averages further behind. All the indexes are climbing and the 50 day moving average is continuing to advance above the 100 day gaining momentum to the upside. Meanwhile you can see that a possible Bollinger Bands Squeeze is starting to form. This could be a signal that the index is above to break to the 2300 level. The chart above remains bullish for the S&P. Resistance is still sitting at 2270 and above but it may prove to be light this time around.
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 of Jan 4 2017
Momentum: For momentum I use a 10 period when studying market direction. Momentum is back positive although just barely but it is 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 Dec 23. The sell signal is still quite strong although it is continuing to weaken.
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 negative and 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 signaling up for stocks.
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 strongly positive and rising.
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 is continuing to rise and is will be near overbought levels shortly.
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 issued an up signal today.
Stock Market Outlook for Tomorrow – Thursday Jan 5 2017
The outlook near the end of 2016 was for stocks to start the new year off with a bounce. They did just that but there are still signals that are pointing down, although they have weakened in the past couple of days.
Technically there are just one two signals, MACD and the Ultimate Oscillator. However both momentum and the Fast Stochastic are just turning positive and both are probably a bit closer to neutral than actually up or down. The Relative Strength Index (RSI) is pointing higher but is nearing overbought. The other indicators are positive. Overall then, technically the market is biased to the upside but with the indexes pressing to new highs trading could become choppy on Thursday and even extend that choppiness into Friday. The underlying trend however is still strongly bullish and that should carry the day on Thursday.
For now then, any dips on Thursday are still opportunities as the markets are ready to try once again to break the all-time highs.
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