Tue May 9 2017 saw another sideways day despite upbeat news from home-builders, a rising dollar and Apple Inc., becoming the first US company in history to top $800 billion in market capitalization just over two years since it passed the $700 billion mark. Tuesday was also the eleventh day that the S&P has failed to move more than 0.4% in either direction. Investors remain focused on the President’s plan to reduce corporate taxes which most believe will boost stock valuations. Stocks therefore, remain in a wait and see mode.
Let’s review the closing numbers and then take a technical outlook of the S&P.
S&P Index Close
The S&P index ended the day down 2.46 points to close at 2396.92
Dow Jones Index Close
The Dow Jones ended down 36.50 at 20,975.78
NASDAQ Index Close
The NASDAQ closed up 17.93 points to end the day at 6120.59 for another new all-time closing high.
Stock Market Outlook
Chart Comments At The Close:
Although the market continues to move sideways, you can see that the sell signal from mid-April has been negated with a new busy signal caused by the recent rise of the S&P to challenge 2400. While the S&P is unable to break through the 2400 still, there are signs that it may need a bit more strength or a new catalyst to push higher. You can also se4e the Lower Bollinger Band has fallen down to the 100 day moving average. If it falls lower it will be another sell signal for the market. The S&P is definitely trending sideways, but it is also not selling off which remains a bullish indicator.
Stock Market Outlook review of Tue May 9 2017
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum remains positive but has fallen back and is considerably weaker than it was last week.
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 Apr 24 2017. The buy signal is steady.
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 slightly but still showing strength.
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 an up signal in place and shows the market is very overbought.
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 rising which remains a bullish signal.
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 positive and moving sideways.
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 up signal in place and is showing the market as extremely overbought.
Support Levels To Be Aware Of:
The market has light support at the 2380 level, 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 – Wednesday May 10 2017
Despite the sideways trend the market is still holding an up bias. Overall, unless the S&P breaks below 2380, the bias up remains in effect.
There are lots of warning signals because the market is sitting at a rather lofty level, but despite this, the outlook is still positive for the index.
The biggest concern now is the extreme overbought signals from both stochastic indicators. That usually warns us that the market could dip. If it does, unless there are stronger down signals, any dip will be an opportunity for trades and many investors will probably jump in on any dip.
Wednesday doesn’t look much different from Tuesday. More sideways action with a bias to the upside.
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