For the stock market outlook for Tuesday I had expected a choppy day and more whipsaws up and down with a bias to the upside. Instead the market put in another blockbuster day with the biggest gain in 2 months thanks primarily to the price of oil rebounding to move to $44.66 as oil producers in the wildfire stricken Fort McMurray area announced plans to increase production.
As well retailer Amazon.com continued to rise moving up $23.32 to $703.07 for a gain of 3.43%. The US dollar also weakened slightly which helped equities move higher as well. With risk aversion moving to the back burner once again, investors piled into stocks.
S&P Index Close
The S&P closed up 25.70 points to 2084.39 pushing through resistance at the 2075 level.
Dow Jones Index Close
The Dow Jones closed up 222.44 points to 17,928.35 placing the index well within reach of the 18000 level yet again.
NASDAQ Index Close
The NASDAQ climbed 59.67 points to close at 4809.88.
Stock Market Outlook – Advance Decline Numbers
Volume though remained stubbornly low once again with just 3.6 billion shares traded. By the close up volume was 80% of all volume being traded and 74% of all stocks were rising. Only 19% of all volume traded was moving lower along with 23% of all stocks. There were 251 new highs, which was the best showing this year and 21 new lows.
The NASDAQ traded 2.1 billion shares. Up volume made up 56% of all volume with down volume coming in at 43%. There were 58 new highs and 70 new lows.
The number of new highs from the S&P continues to improve but the NASDAQ cannot break free of the rising number of new lows. This keeps every rally suspect and pushes many investors to the sidelines as they fear each rally will not hold.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 10 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 50 day simple moving average (SMA) and above the 20 day simple moving average (SMA). It is back above 2080.
Throughout this latest downturn the S&P stayed above all 3 long-term moving averages which is a good signal for the bulls. The 100 day moved closer to pushing above the 200 day. This will be a major buy signal when it happens.
The Bollinger Bands are still trending more sideways than up which points to stocks still moving sideways rather than higher.
The closing candlestick on Tuesday is usually followed by some selling on the next day. But it remains bullish for equities for later in the week.
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 support. 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 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 April 22. The sell signal was weaker on Tuesday.
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 back positive and rose on Tuesday.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving higher supporting higher prices for equities on Wednesday.
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.
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.
Stock Market Outlook for Tomorrow – Wednesday May 11 2016
The technical indicators at the close on Tuesday are showing signs of moving to a positive stance. The two stochastic indicators are strongly bullish for Wednesday and the Ultimate Oscillator and Rate Of Change both indicate higher prices are coming for equities.
The closing candlestick is quite bullish but often on a day when the market has had a big up move and closes at the high, there is some selling the following day.
We have not seen many follow through days from the S&P since December 2014 on big up moves. Therefore, we could see some selling on Wednesday morning but overall the market looks like it wants to move higher and we should see a positive close on Wednesday.
The outlook for stocks then is for the S&P to push back toward 2100. This latest push may have enough strength to break 2100 and close above it this week.
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