The outlook for Monday was for stocks to move lower. Concern keeps growing over the United Kingdom voting to leave the European Union. Whether this would actually impact the economy of the UK is unknown to a large degree. However it is not that uncertainty that is driving stocks lower. It is uncertainty in general which investors always hate. Meanwhile the US dollar moved higher which pushed oil lower for a second straight day. US Bonds continued their advance again today as investors were still fleeing to US bonds for “safety”. Even the High Yield Bond Junk market pulled back as investors dumped what is commonly referred to as Junk bonds in favor of what they perceive to be more secure government bonds.
S&P Index Close
The S&P on Monday tried to rally in the morning but by lunch hour the S&P was down to 2085.86. This brought in a second rally for early afternoon that ended up basically being a perfect setup to buy short instruments such as the SDOW, SQQQ or Spy Put options as the market spent the final hour of trading falling to close below 2080. The loss on the day was 17.01 points for a drop of 0.81%.
Dow Jones Index Close
The Dow Jones followed the same course as the S&P although in the mid-morning it did reach 17,893 and many TV analysts being interview though the Dow would hold the level heading into the Fed’s interest rate announcement on Wednesday. Instead this turned out to be the high for the day. The afternoon saw a lower rally attempt which matched the push by the S&P. The close saw the Dow down 132.86 points for a loss of 0.74% and a close at 17,732.48.
NASDAQ Index Close
The NASDAQ once again had the worst loss of the day beating the other two major indexes with a drop of 0.94%. The NASDAQ fell 46.11 points to close at 4848.44.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – June 13 2016
Stock Market Outlook: Chart Comments:
The S&P close at the 50 day simple moving average (SMA) on Monday which often will result in a bounce back rally attempt. The closing candlestick is bearish for Tuesday but the indexes all close at or near their lows for the day which again, is often an oversold signal and a bounce occurs.
The SPX continues to be led by the 50 day and then the 100 day both of which are rising which is an up signal for stocks. Overall the market is now set up as it should be with the 50 day, following by the 100 day followed by the 200 day.
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 resistance which as we saw today, continues to keep the market advance well in check.
Very light support has been built around 2090.
2075 is light but better support. Below that is 2050 which is light support.
There is also light support at 2025.
Better support is at 2000.
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 negative and is falling.
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 May 25. Today MACD issued an unconfirmed sell 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 negative and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and falling which indicates the present rally has run out of steam.
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 overbought and is pointing down for Tuesday.
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 is also overbought and it too is pointing down for Tuesday.
Stock Market Outlook for Tomorrow – Tuesday Jun 14 2016
For Tuesday the technical indicators are now overwhelmingly negative and pointing to lower prices ahead. However much of the downside is not technical in nature but instead emotional. Investors are worried about the Fed’s stance on interest rates which we will find out more about on Wednesday afternoon. Concern is also very high on the UK voting to leave the EU which presents investors with an “unknown entity” which is both alarming and a cause for worry for many investors.
All of this is weighing on the market and stocks are selling lower as a result.
There are though signs that the market is nearing a point where it could bounce. The bounce could happen as early as Tuesday, but if it does not, Tuesday looks weak with a bias lower however overall the market may just drift sideways as investors wait for the Fed’s decision on interest rates on Wednesday.
Therefore the outlook for Tuesday is mixed but the bias remains lower for now.
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