The markets opened lower on Wednesday and that unnerved a large number of investors who decided to sell positions out. This proved to be a mistake as the markets recovered the early morning dip and closed higher on the day and back in positive territory.
S&P Index Close
The S&P index fell to an intraday low of 2074.02 but the rally back recovered 1.25% to close the day at 2099.73.
Dow Jones Index Close
The Dow Jones Index was down over 125 points near the open but it too came back closing at 17,918.62 up 0.44% for the day.
NASDAQ Index Close
The NASDAQ had the best day among all three major indexes. It fell at the open but by the close it was up 0.75% to 4859.16.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – July 6 2016
Stock Market Outlook: Chart Comments:
The S&P fell back to the 20 day simple moving average (SMA) at the open and bounced back higher. The closing candlestick is bullish but often the following day, which would be Thursday, markets pullback and then the bullish signal commences.
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 moving sideways.
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 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 overbought for a second day.
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 Thursday and is 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 overbought.
Stock Market Outlook for Tomorrow – Jul 7 2016
For the day before the unemployment report, stocks may open weak but should close positive on the day. The closing candlestick today is often followed by a bearish day and then bullishness. That would mean Thursday would be bearish. I don’t think that will happen because of the unemployment numbers on Friday.
I am expecting investors to buy the market ahead of the unemployment report.
Technically, the indicators are 5 to 1 positive. That means the chance of the market falling back dramatically is almost non-existent unless a new catalyst to the downside should surprise the markets. I know of no such surprise down element.
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