Friday saw more weakness in stocks and a bit of economic news as well. Thursday had already shown the biggest jump in wholesale inflation in a year along with Weekly Initial Unemployment Insurance Claims of 254,000 which showed no signs of major layoffs were happening. On Friday retail sales posted a gain of 0.6% in June far above the forecasts of just 0.1%. This was the third straight gain. As well industrial output jumped in June at the fastest rate in eleven months. At the same time the New York area manufacturing reading fell to 0.6 in July from 6.0 in June which seemed to conflict with the reports from retail sales and industrial output. On top of this cloudy picture came news of a coup attempt in Turkey which sent the US dollar higher. Stocks stayed in a tight trading range and investors tried to decide what to make of all the signals. Most investors though failed to hear that the Japanese stock market close up 9% for the week on expectations of further government stimulus while the Yen faltered.
S&P Index Close
The S&P index ended the day virtually flat with a loss of just 2.01 and down to 2161.74.
Dow Jones Index Close
The Dow on the other hand managed a slight gain and closed up 10.14 points to 18,516.55.
NASDAQ Index Close
The NASDAQ followed the S&P to closed down 4.47 points to 5029.59.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook -July 15 2016
Stock Market Outlook: Chart Comments:
The S&P moved almost sideways on Friday. This left a third closing bearish candlestick. The index is now moving sideways away from the Upper Bollinger Band indicating growing weakness. The 20 day simple moving average (SMA) is turning sharply higher as it tries to follow the rapid movement of the index up. As explained on Thursday’s stock market outlook, rarely does the sharp upturn in the 20 day last.
The Upper Bollinger Band is still moving away from the market index while the lower Bollinger band is starting to turn sideways another sign of weakness.
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 falling for a third day.
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 unchanged on Friday.
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 falling away from an overbought reading.
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 is extremely overbought and has a neutral to bearish signal.
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 Stochasticis very oversold and has a down signal in place for Monday.
Stock Market Outlook for Tomorrow – Jul 18 2016
The technical indicators are all still strongly positive but are showing more signs of weakness. The Fast Stochastic is now signaling down and the Slow Stochastic has a bias to the downside developing. Almost all the indicators are pulling back.
The weakness from Friday should continue Monday although earnings on Monday from Bank Of America if above expectations, should boost stocks once more.
The outlook is for more dips on Monday but they will be bought into by investors keeping the market from falling very far. The close should be slightly negative.
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