Monday saw the market sell-off continue with stocks being hammered again as investors continue to worry about the UK leaving the EU. Most don’t seem to realize that this will be a long process, while at present everything is unchanged. This is not like the Lehman Brothers collapse which signaled a credit crisis of immense proportions. But investors are drawn into the selling as more and more stocks fall. Today’s losses mark the worst two-day sell-off since August of 2015.
S&P Index Close
The S&P index fell from the morning open. In the morning the index collapsed straight through the 2000 major support level and hit 1991.72 by 11:00 AM. From there the market tried to recover to the 2000 level and move higher. That failed and the lunch hour saw the market keep testing 2000 and moving below it. The worst selling though was in the afternoon when the S&P broke down to 1991.68 around 3:30 on large volume. That though sparked a small rally which ended with the S&P at 2000.54 for a drop of 36.87 points. This was a loss of 1.81% for the day.
Dow Jones Index Close
The Dow Jones which lost 610.32 points on Friday, fell over 300 points intraday on Monday. It managed to close off the lows though, but still lost 260.51 points. Today’s loss was 1.50% and left the Dow at 17,140.24. The Dow has now lost pretty well 1000 points in two days.
NASDAQ Index Close
The NASDAQ once again had the worst day. After losing 202.06 points on Friday, it dropped another 113.54 points on Monday. Today’s loss was 2.41% which left the index at 4594.44.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – Jun 27 2016
Stock Market Outlook: Chart Comments:
The S&P closed below all 3 major moving averages again on Monday but left behind a somewhat bullish candlestick which points to a possible rebound rally on Tuesday or Wednesday.
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 if it breaks below the 20 day or 50 day simple moving average (SMA), will be a sell signal.
The SPX closed well outside the Lower Bollinger Band but off its lows. It closed at the 2000 level which is a good sign for a possible bounce on Tuesday.
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 resistance.
Below that is 2050 which is light resistance.
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 negative and falling sharply.
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 very 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 has a sell signal in place 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 has a sell signal in place and is deeply oversold. You can see in today’s chart that it tried to bounce.
Stock Market Outlook for Tomorrow – Tuesday Jun 28 2016
For Tuesday stocks remain technically weak and the tech indicators are pointing to lower prices ahead. However there are signals of the market being oversold. The Fast Stochastic tried to rebound today without success. It may rebound on Tuesday.
Reviewing all the signals above, the outlook is for Tuesday to open with a bounce higher, followed by a slight dip and then another move still higher. The higher move will pullback through the lunch hour and may even fall back to 2000 in the early afternoon, but the remainder of the day should see the S&P close above 2000. Any rally at this point is suspect and should be traded in my opinion.
Caution is warranted at this time.
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