Friday saw the biggest one day decline since August of 2015 when investors thought China’s economy was slowing. It saw the highest volume day since late January’s drop. The drop on Friday was exacerbated by the fact that the market had moved higher to close above 2110 on Thursday as investors were confident the UK vote would be to stay in the EU.
With many investors stunned, currency markets in turmoil as the pound crashed to 30 year lows, oil falling, gold and bond yields rising, it was quite the day.
S&P Index Close
The S&P index fell 75.91 points to lose 3.59% on the day and close at 2037.41. A late in the day rally to try to retake 2050 failed bringing in more sellers at the close of the day.
Dow Jones Index Close
The Dow Jones fell 610.32 points losing 3.39% to end the day at 17,400.75 having lost the 18000 level which it has reached on Thursday, yet again.
NASDAQ Index Close
The NASDAQ once again was the weaker of the three indexes, losing 4.12% of its value and closing down 202.06 points to close at 4707.98.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for June 24 2016
Stock Market Outlook: Chart Comments:
The S&P closed below all 3 major moving averages and left a bearish candlestick. A drop this big that takes out all 3 major moving averages in one day is almost always followed by a rally. It will be a failed rally however.
The Lower Bollinger Band has taken a sharp downturn. We need to watch the Upper Bollinger Band which is currently pointing up for when it points lower. A move lower for the Upper Bollinger Band will be a sell signal.
The SPX continues to be led by the 50 day and then the 100 day followed by the 200 day. The 50 day moving average is pulling back. The drop on Friday below all 3 major averages is a sell signal on the market. It has to be confirmed however by the 50 day falling below the 100 day and then 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 primary resistance and continues to keep the market advance well in check.
2090 was very light support and is now light resistance.
2075 is light support and may short be light resistance.
Below that is 2050 which is light support.
2025 is better support than 2050 through to 2090.
2000 is now 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 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 is gaining strength to the downside.
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 toward oversold.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and falling indicating lower prices are ahead for stocks.
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 issued a sell signal on Friday.
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 issued a sell signal on Friday and is over oversold.
Stock Market Outlook for Tomorrow – Monday Jun 27 2016
For Monday stocks are technically weak and the tech indicators are pointing to lower prices ahead. The Fast Stochastic shows that stocks could bounce from being so oversold on Friday. Any bounce though is not going to hold and the market will move lower.
Reviewing all the signals above, the outlook for Monday is for stocks to open lower, rally and then turn back down to close lower on Monday. This could set up Tuesday for a possible stronger bounce. I will know more Monday after the markets close.
Caution is warranted at this time.
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