The Stock Market Outlook for Tuesday July 5 was for stocks to experience weakness and close slightly lower. With concerns once again rising over global growth and still more rumblings on Brexit fallout, investors took profits ahead of Friday’s unemployment number which is often a large mover of markets. It ranks right up there with Fed meetings, comments and announcements.
S&P Index Close
The S&P index followed the course outlined last night with weakness throughout the day from the minute the market opened. The close saw the S&P down a modest 14.40 points to 2088.55.
Dow Jones Index Close
The Dow Jones Index also spent the day lower but closed well off the lows, down 108.75 points for a loss of 0.61% to 17,840.62.
NASDAQ Index Close
The NASDAQ dropped the most of the three indexes, falling 0.82%. It closed at 4,822.90.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Jul 5 2016
Stock Market Outlook: Chart Comments:
The S&P closed above all the major moving averages on Tuesday but back below the 2100 resistance level. The closing candlestick is somewhat bearish for Wednesday.
The S&P fell to the 20 day simple moving average (SMA) and then bounced off of it to close well off the day’s low.
All the major moving averages are continuing to move higher which suggests this weakness will be short-lived.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015.
2100 is still primary resistance and continues to keep the market advance well in check.
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 but back falling again.
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. This buy signal was confirmed today but both the buy signal and the confirmation were poor. I would want to see a stronger buy signal on Wednesday or Thursday to solidify this signal.
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 now overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and sideways although in general it is more neutral than anything else at present.
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 Wednesday.
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 Wednesday although it turned lower today and is ready to issue a sell signal if the market moves lower on Wednesday.
Stock Market Outlook for Tomorrow – Jul 6 2016
The weakness on Tuesday was expected and was primarily profit-taking. At this time I see little concern over Tuesday’s weakness and Wednesday looks like more weakness may appear.
The technical indicators are a bit mixed in their outlook. Overall the technical signal is that Wednesday may be weak as seen by the overbought condition of the Ultimate Oscillator and the Fast Stochastic looking ready to signal down, but there are more signs that the market will move back up shortly and challenge 2100 again. Therefore weakness remains an opportunity to put capital to work to prepare for yet another attempt to break through 2100 shortly. Wednesday then should be weak but Thursday and Friday may not. A lot of the end of the week action will be determined by the June unemployment numbers on Friday.
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