The stock market outlook for Monday was for a choppy day but a higher close. At one point toward the end of the day it looked like a higher close would be in store for the S&P. However computer selling in the last hour pushed the rally, which by 3:00 PM was up to 2064, back down to close below 2060 at 2058.59.
Much of the choppiness was caused by the rising US dollar which pushed oil and gold lower along with many other commodities. Analysts remain split on whether the Federal Reserve will raise interest rates in June. Just a day earlier the consensus on the back of lower than expected employment numbers was that the Fed would now wait until September. But by Monday talk rose again of the possibility of a June rate hike.
Gold fell to its lowest level in 11 weeks closing at $1266.60 an ounce. As well news that winds were shifting and moving the Alberta wildfires away from the oil-sands by Fort McMurray, dropped the price of oil. On top of that news was the US crude inventories numbers which showed 543.5 million barrels stored which is the highest since October 1929. With inventory levels at record highs, the futures faded on oil prices.
S&P Index Close
The S&P had a wide-ranging day with a low of 2054.31 and high of 2064.15 closing the day at 2058.69 up just 1.55 points.
Dow Jones Index Close
The Dow Jones closed lower on the day losing 34.72 points and ending the day at 17,705.91.
NASDAQ Index Close
The NASDAQ managed to climb 14.05 points although it was higher at 3:00 PM. It closed the day at 4,750.21. Tech stocks faded in the last hour of trading.
Stock Market Outlook – Advance Decline Numbers
Volume was almost unchanged from Friday at 1.41 Billion. By the close up volume made up just 37% of all volume being traded and only 45% of all stocks were rising. 62% of all volume traded was moving lower along with 52% of all stocks. There were however 233 new highs and 25 new lows.
The NASDAQ traded only 1.63 billion shares. Up volume made up 45% of all volume with down volume slightly ahead at 47%. There were 49 new highs and 56 new lows.
The number of new highs from the S&P despite the market advancing shows just how narrow the move higher has become. At 233 highs this is the best showing for the S&P this year and yet the majority of the volume was to the downside. The market remains split with 45% of stock moving up and 52% moving down. This is not the type of market that will run away to the upside.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 9 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 50 day simple moving average (SMA). In this latest downturn the S&P each day has managed to close above the longer-term moving averages. These are the 50, 100 and 200 day. The 50 day simple moving average (SMA) is still above the 200 day moving average and the 100 day moving average is ready to move above the 200 day. These are strong buy signals for the market.
The Bollinger Bands are still trending more sideways than up which points to stocks still moving sideways rather than higher. This could change to lower.
The closing candlestick on Monday is normally bearish for the following 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 resistance.
2075 is light resistance. Below that is 2050 which is light support.
Better support is at 2000.
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 trying to rise.
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 April 22. The sell signal is still strong on Monday.
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 turned negative on Monday and is falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving sideways.
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 is signaling up for stocks and may be about to bounce.
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 is signaling up for stocks and is also trying to bounce.
Stock Market Outlook for Tomorrow – Tuesday May 10 2016
The technical indicators at the close on Monday have changed to 2 with up signals, one that is positive and 3 that are negative.The market is mixed.
The 100 day is still not above the 200 day moving average but remains just below it and ready to move up. The closing candlestick on Monday tends to be bearish for the following day.
We could see more of the same on Tuesday with the market treading water trying to push higher and not getting much traction. I am expecting another day of the market trying to move higher but meeting resistance along the way.
Look for another choppy day of trading on Tuesday with almost an equal chance of a higher or lower close.
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