The Stock Market Outlook for Wednesday hinged on the Fed’s interest rate decision. Yellen’s decision to not raise interest rates in June was “baked” into the market, but the Fed’s outlook for only one further interest rate increase this year and their outlook for 2017 and 2018 was what caught investors off-guard. It took investors a bit to realize that the Fed’s comments basically indicated that the economy was a concern. That means the chance of business improving earnings in the next quarter is probably a lot less than previously hoped. That means the chance of the market move above 2100 is probably quite limited. Investors did seem to get the message half way through the afternoon and selling commenced which pushed the market lower.
Gold rose following the Fed’s decision and bonds fell further.
Meanwhile on economic news the Empire State Index rebounded to 6.0 for June from negative 9 in May. The June trading was still below the April reading of 9.6 but did beat estimates and does show there is expansion in New York region.
As well the ISM factory index rose to 51.3% in May from 50.8% in April. While this is a small increase, it does point to slight expansion which is a good sign for the economy.
The last piece of economic news on Wednesday was from Producer Prices which showed a sharp rise in May primarily due to fuel costs increasing. However wholesale prices on most goods and services were almost unchanged. When food, energy and retail are removed from the equation, core producer prices actually fell 0.1% in May. This means wholesale prices are not falling but they are also not rising. There is basically little wholesale inflationary pressure which is negative for economic expansion.
S&P Index Close
The S&P on Wednesday was positive for most of the day staying above 2080 until later in the afternoon. The close saw the S&P drop 3.82 points to close at 2071.50 which is back below the 2075 support level.
Dow Jones Index Close
The Dow Jones moved higher for most of the day but the close saw the Dow move lower falling 34.65 points to end the day at 17,604.17.
NASDAQ Index Close
The NASDAQ gave back all its earlier gains in the day but closed down just 8.62 points to 4,834.93.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – June 15 2016
Stock Market Outlook: Chart Comments:
The S&P spent much of the day at the 50 day simple moving average (SMA) but fell below it by the close. Often this is followed by a bounce back attempt. The closing candlestick is also bullish for a bounce back attempt.
Looking at the chart you can see that today’s market action was actually more sideways than up or down. This is good for stocks at this point if the goal is to not see them fall.
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.
The 20 day simple moving average (SMA) is continuing to rise which is a good sign for stocks.
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 and 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 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 sell signal on June 14. The sell signal grew on Wednesday but at negative 3.04 it is not a strong 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 indicating that in general, lower stock prices are being paid.
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 pointing down for Thursday.
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 pointing down for Thursday.
Stock Market Outlook for Tomorrow – Thursday Jun 16 2016
For Thursday the technical indicators are primarily negative. Only the Rate Of Change remains slightly positive. However MACD is only slightly negative and momentum is not building to the downside.
The move lower at the close today may set the market up for another rally attempt on Thursday, at least in the morning. The close looks to be still negative for Thursday.
While Thursday looks to end negative, investors should be aware that any positive news on the Brexit vote will send stocks higher. This should be included in trading plans for the next few days.
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