Wednesday Mar 22 was quite the day again for stocks. The morning saw stocks fall at the open as investors continued the selling from the day before. However the volume numbers were low and selling as a market breadth percentage was low. Stocks turned around and moved higher before a terrorist incident unnerved investors again. They bailed once more but within a short while they regained their composure and pushed stocks back up. The close saw the S&P and NASDAQ with slight gains and the Dow with just a slight loss.
Let’s look at the closings on Wednesday and then take a technical overview.
S&P Index Close
The S&P index ended the day up 4/43 points to close at 2,348.45
Dow Jones Index Close
The Dow Jones ended down 6.71 points to close at 20,661.30.
NASDAQ Index Close
The NASDAQ closed up 27.82 points to end the day at 5,821.64.
Stock Market Outlook
Chart Comments At The Close:
On Wednesday Mar 22 2017 the S&P fell to the 50 day moving average in the early morning trading and then bounced back up. Technically this is a common event and could signal the end of the selling from Tuesday or it could just be a delay and a bounce attempt.
What is important is the closing candlestick often signals a short-term reversal in the trend which could mean the market is about to recover the prior day’s losses.
At the same time the market also closed just below the important 2350 level which is light support but is also symbolic of the present rally.
All the major moving averages are still climbing but the 21 day short-term moving average is pulling back. Stocks re also into the Bollinger Bands Squeeze. Yesterday the decline pushed the S&P outside the Lower Bollinger Band. Today the index closed back at the Lower Bollinger Band. Normally this is a bullish sign but one day selloffs often have a second day of weakness.That could have been Wednesday morning, or it might be Thursday or Friday of this week.
Stock Market Outlook review of Mar 22 2017
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative but trying to climb back.
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 Mar 7 2017. At the close of trading on Wednesday the sell signal is stronger.
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. It is near oversold readings but has lots of room to fall lower if more selling starts.
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 down signal in place and is nearing oversold readings.
Rate of Change: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. The rate of change signal is extremely oversold and has a strong negative reading. Readings this low are often followed by a bounce back.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. The RSI signal is low at $29.30 and showing some signs it wants to climb higher.
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 use for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic has an down signal in place and it too is nearing oversold signals.
Support Levels To Be Aware Of:
The market has light support at the 2350, 2300 and the 2250 level. There is also light support at 2195 but better support is at 2180 and then 2150.
Stock Market Outlook for Tomorrow – Thurs Mar 23 2017
The technical indicators are all negative but many are showing signs of being oversold or nearing oversold levels. They are also showing signs of an impending attempt to move back up.
After a sell-off as strong as Tuesday’s, normally we should get a bounce back. Wednesday did not see that much of a bounce. Part of the reason could have been the result of the terrorist attack in London. This probably delayed the bounce.
The chance of a bounce on Thursday is probably better than it was on Wednesday. After the bounce we could see weakness develop again. A lot depends on the Healthcare Bill. If it fails to pass, more selling is likely.
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