On Thursday, many of the stocks that were helping send the index higher were falling as the market decided to give back some of the recent gains. The market is trying to consolidate gains and yet hold the market at the present location without losses. The chance of this working is not terrific. Normally the market will pullback to retest for support, before it moves higher.
Today the US dollar rose, oil fell and Intel and Facebook pulled back. They were joined by the transportation sector which was hammered by a decline of 11.2 percent in Southwest Airlines.
S&P Index Close
The S&P index moved sideways at the open but by 11:30 when it became obvious the S&P was not going to push higher, sellers took the market lower reaching 2160 before rebounding to close down 7.85 points to 2,165.17.
Dow Jones Index Close
The Dow also followed the S&P lowered and at one point it fell below 18,500 before closing up at 18,517.23, for a loss of 77.80 points on the day.
NASDAQ Index Close
The NASDAQ pulled back 16.03 points to close at 5,073.90.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Jul 21 2016
Stock Market Outlook: Chart Comments:
The S&P has been moving sideways for 6 trading days. Today’s move down to the 2160 level as the intraday low has been expected for several days as the market remains extremely overbought. The closing candlestick is bearish for Friday.
The 20 day simple moving average (SMA) is continuing to rise as are the other major moving averages which indicates this is still an uptrending market.
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 back.
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 weaker on Thursday.
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 falling back indicating prices are continuing to fall 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 extremely overbought and has a down signal in place.
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 also has a down signal in place for Friday.
Stock Market Outlook for Tomorrow – July 22 2016
The outlook is shifting to stronger weakness but continuing to hold to above 2160. This means dips in the market are still seen as trading opportunities which is bullish for stocks.
Friday looks like the market will stay weak and possibly close lower but the 2160 level, which is very light support, looks like it will be tested once more this Friday.
The technical indicators are split 4 to 2 positive. The two that are negative as the two stochastic indicators. With both of them flashing down signals, the outlook for a large rally higher in stocks is limited for Friday.
A weak day is expected for Friday as the overbought condition is worked out. Look for dips to dominate again on Friday but the underlying uptrend is still intact.
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