The Stock Market Outlook for Tuesday was for a bounce in stocks. The bounce we got was wide ranging. It was definitely stronger and encompassed more stocks than I would have predicted. This means Wednesday could see the market not retest 2000. Let’s review today’s action, the technical indicators and their outlook and what we should expect for Wednesday.
S&P Index Close
The S&P indexjumped in the morning, took a couple of dips but still mamaged to hold a gain of 1% until late afternoon. Then heavier buying appeared as obviously computers were buying the market in the last hour. This sent the S&P to a gain of 1.78% almost wiping out all of Monday’s losses of 1.81% and 36.87 points. The S&P closed at 2036.09 up 35.55 points.
Dow Jones Index Close
The Dow Jones Index lost 260.51 points on Monday, but on Tuesday it regained 269.48 points for a 1.57% increase. This wiped out Monday’s losses entirely. The Dow closed at 17,409.72.
NASDAQ Index Close
The NASDAQ finally had the best day among the three indexes, something we have not seen a lot of this year. On Monday it dropped 113.54 points but today it gained 97.42 points for an increase of 2.12% almost wiping out Monday’s loss. It closed at 4,691.87.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – June 28 2016
Stock Market Outlook: Chart Comments:
The S&P closed below all 3 major moving averages again on Tuesday but it moved inside the Lower Bollinger Band which is a good signal that the market is stabilizing. The closing candlestick is bullish although the SPX closed at the highs for the day which often means selling to start the day on Wednesday.
The 20 day simple moving average (SMA) is turning sharply lower which is to be expected. As long as it does not fall below the 50 day moving average the market will eventually move still higher this week.
The close on Tuesday was well above the 2000 support level and above the 2025 light support level.
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 back rising.
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 rising and is no longer oversold.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and trying to rise.
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 Wednesday.
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 but you can see in the technical chart that it is rebounding and near the point where it will issue a buy signal.
Stock Market Outlook for Tomorrow – Wednesday June 29 2016
For Wedneday stocks remain still technically weak but the outlook is improving despite all the indicators still being negative. Today’s rebound was strong and it turned a lot of the negative indicators back higher although still not positive. The bounce was wide spread and engulfed most stocks. This is something only recovery bounces do, not rebounds. The bounce will experience weakness on Wednesday but overall there could be enough strength from Tuesday’s rally, to carry into Wednesday and see a higher close.
Whatever happens on Wednesday, the lows on Monday shouldn’t be seen again so unless a new calamity or catalyst to the downside should appear this week, I believe the lows were in on Monday.
Expect a move lower on Wednesday but not down to 2000 and then another move back up. It should be a more choppy day of trading but don’t be surprised if the close is still positive or only slightly negative. Just remember, a lot of these big rallies have been given back the very next day so while I think the lows are in, investor emotion is difficult to gauge. If investors think there is a more serious problem developing that will impact their portfolios, they will be back selling on Wednesday. I do not believe that will be the case.
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