For Monday March 6 2017, I had expected some morning weakness which I anticipated would be stronger than prior early morning pullbacks. However I expected a move back up in the afternoon and a slightly positive close. Instead the morning weakness turned into heavier selling than expected due to North Korean firing of 4 missiles on the weekend. As well the wiretapping accusations by President Trump seemed to unnerve some investors who decided to step aside and take some profits. Finally, worries about whether the Fed would indeed raise interest rates or in fact not raise them next week had some investors taking profits in the high riding financial sector where almost anyone who is holding stock has profits to be had.
The selling was steady past 11:00 AM and then a bit of buying erupted halfway through the midday lunch. By 1:00 a lot of the losses had been recovered but while the market tried to hold and even pushed higher into the last half hour, investors for the final 20 minutes, sold stocks to push the S&P to a lower close and a loss of 0.33%. Despite the morning selling, the closes of all three indexes were well off their earlier lows.
Let’s look at the closings on Monday and then take a technical overview.
S&P Index Close
The S&P index ended the day down 7.81 points to close at 2375.31.
Dow Jones Index Close
The Dow Jones ended down 51.37 points to close at 20,954.34.
NASDAQ Index Close
The NASDAQ closed down 21.58 points to end the day at 5,849.17.
Stock Market Outlook
Stock Market Outlook review of Mar 6 2017
Chart Comments At The Close:
On Monday Mar 6 the S&P traded lower below the Upper Bollinger Band and left behind a neutral closing candlestick. It is still above the 21 day simple moving average (SMA). You can see in the chart a similar closing candlestick on Feb 28, 4 trading days earlier. That resulted in a jump higher by the S&P. Tomorrow we could see a similar attempt although there are more indications the S&P will reach the 21 day moving average first.
The Lower Bollinger Band which fell below the 50 day moving average is turning sharply back up which if it crosses the 50 day moving average and moves above it will be a bearish signal for the market. At present the market needs to hold the 2350 level which is the 21 day moving average or it risks falling deeper.
The major moving averages are all still climbing which is bullish.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive 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 buy signal Feb 10 2017. The buy signal lost some strength on Mondayy.
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 positive and falling.
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.
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 positive and sideways which would indicate prices are not expected to change on Tuesday.
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. RSI has fallen dramatically. It is still at readings that signal further weakness should be expected.
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 a down signal in place and is overbought.
Support Levels To Be Aware Of:
A bounce is possible off 2350 which is the 21 day moving average should the market fall that low.
The market has light support at the 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 – Tuesday Mar 7 2017
The technical indicators for Tuesday are once again weaker and there are now two sell signals from both stochastic indicators, in play.
As well MACD is quickly losing the buy signal and could issue a sell signal if the S&P falls further.
Monday left behind a neutral closing candlestick. the S&P needs to see a rebound on Tuesday or at the least, a move down to the 21 day moving average and then a rebound to keep the rally alive at this point.
However there are still 5 positive technical indicators, which although they are losing their strength, are still positive which means the rally still hold the bias.
For Tuesday stocks look set to open with a bit of a bounce, then fall back. From there the midday or afternoon should see the index try to turn back positive. Tonight’s numbers are not all that encouraging but technically, there is still the chance of a rebound attempt.
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