The outlook for Wednesday was for some weakness to be seen as the overbought condition of the stock market starts to weigh on stocks heading into earnings. Yesterday it was oil that help propel the market higher. Today oil fell pulling down the market. On the other hand the Fed’s Beige book released today supports the notion that interest rates won’t be raised any time soon. That helped the market.
S&P Index Close
The S&P index closed basically flat on the day at 2156.43 up 0.29.
Dow Jones Index Close
The Dow Jones Index had the best day of the three indexes closing at a new all-time high of 18,372.12 up 24.45 points.
NASDAQ Index Close
The NASDAQ fell back slightly by 17.09 points to close at 5005.73.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook -July 13 2016
Stock Market Outlook: Chart Comments:
The S&P was flat on the day. This left a neutral to slightly bearish candlestick at the close. Basically, this candlestick often signals that a trend will change for a day or more. At this point however, with the other technical indicators quite strong, it is questionable if the candlestick will have any impact.
The 20 day simple moving average (SMA) is still turning higher and is followed by the 50, 100 and 200 day moving averages who are all turning higher.
The Upper Bollinger Band and Lower Bollinger Band are moving away from the market which indicates the market will try to push higher.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015.
2100 has become light support.
2090 is very light support.
2075 is also light support
Below that is 2050 which is light support.
2025 is better support than 2050 through to 2090.
2000 is primary support.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support as is 1920. 1900 is more symbolic than anything else.
1870 is support. 1840 continues to be support. The 1820 level is light support. The strongest support level is at 1800.
1775 and 1750 are both critical support for the present bull market. While 1775 is important it is 1750 that is the bottom line.
A break of 1750 would mark a severe correction from the all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.
Stock Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and very overbought.
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 July 1. The buy signal was stronger again on Wednesday.
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 very overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and and rising indicating higher prices are ahead.
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 an up signal in place for Thursday and is extremely overbought.
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 set for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic also has an up signal in place for Thursday and is also very overbought.
Stock Market Outlook for Tomorrow – Jul 14 2016
The technical indicators are all still strongly positive and climbing, but they are now showing the market as very overbought. It will take more than a day to work out the overbought condition at present however with some earnings already in, stocks could still try to push higher despite being so overbought.
Dips are being bought which kept the market in check from any deep decline on Wednesday. I would expect more of the same if there are dips on Thursday.
Expect more choppy trading on Thursday but there is still a chance of another positive close. Tomorrow we get the first major financial earnings from JP Morgan Chase. If they surprise to the downside, expect the market to open lower. If they surprise to the upside, the market will pop at the start.
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