On Wednesday the market was all about the Fed’s decision on interest rates. The morning started with a rally attempt that quickly faded within the first half hour and the S&P then began a dive that broke easily through 2165. By the lunch hour the market was down around the 2162 to 2163 level.
Ahead of the Fed’s announcement the index moved up to the 2165 level. At 2:00 PM the index slipped to break 2160 for a brief moment and then rallied into the late afternoon breaking through 2170. The late day rally failed however and the final few minutes saw the market sell back to 2166 for a loss of the day. Overall though the reaction to the Fed announcement was somewhat contained and flat.
Intraday SPX -July 27 2016
S&P Index Close
The S&P index lost 2.60 points to close at 2166.58.
Dow Jones Index Close
The Dow closed down just 1.58 points to 18,472.17.
NASDAQ Index Close
The NASDAQ rallied thanks to Apple Stock, moving higher by 29.76 points to 5139.81.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook -July 27 2016
Stock Market Outlook: Chart Comments:
The S&P has been moving sideways for 9 trading days. There have been numerous bearish candlesticks, one after the other but the index has hung on. The candlestick at the close on Wednesday was also bearish.
All the major moving averages are moving higher but you can see that a possible Bollinger Bands Squeeze is starting to form. This will either send the index higher or lower.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
2160 is very light support.
2100 is 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 has been weaker day after day and today again the signal is declining.
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 falling lower.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and rising which seems in contrast to the Ultimate Oscillator, momentum and Moving Average Convergence / Divergence signals.
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 is also overbought and has a down signal in place.
Stock Market Outlook for Tomorrow – July 28 2016
Following the Fed’s decision not to raise interest rates, but to keep the possibility of a rate increase open for September, the market outlook is lower for Thursday.
The technical indicators support this outlook with 2 sell signals and three signals that are still positive but falling quickly. Only the Rate Of Change is not in agreement. It continues to signal that higher prices are coming.
With 5 signals pointing to further weakness on Thursday, the outlook is for a negative close.
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