Overall on Thursday stocks did not perform well. The early morning bounce was expected from last night’s stock market outlook. The market then fell lower and never recovered the early morning high. Retail stocks continued to be hammered. After hours Nordstrom shares collapsed 17% on an earnings miss. My personal opinion is I have rarely found much to buy at either Nordstrom or Macys so I was not surprised by the decline in sales. I think the first clue was from Victoria’s Secret on May 5 where sales were lower in April. The company though had been reducing their coupons and sales as well as curbing sending their catalog. Overall I think the retail landscape is changing as more people continue to buy from Amazon which means less sales for other retailers. Walmart announced a two-day delivery to compete with Amazon. They are one retailer that can afford to offer this kind of service but many other companies cannot.
The decline of Nordstrom after hours will weigh on the market on Friday. Apple Stock today also broke through long-term support at $90 but closed back at $90.34 as it tries to hold support. The drop in the stock weighed on the market on Thursday.
S&P Index Close
The S&P had a roller coaster day with a high of 2073.99 and a low of 2053.13. It closed down just 0.35 points to 2064.11.
Dow Jones Index Close
The Dow Jones was as high as 17,798.19 and as low as 17,625.38 before closing up 9.38 points to 17,720.50.
NASDAQ Index Close
The NASDAQ fell 23.35 but it could have been a worse day with Apple Stock pressuring the NASDAQ lower. It closed at 4,737.33.
Stock Market Outlook – Advance Decline Numbers
Volume was not as strong as we usually see on down days. Today just 3.78 billion shares traded. Of those shares 62% were lower by the close. 50% of all stocks were falling but 46% were rising. New highs came in at 105 while new lows were up to 41.
The NASDAQ traded 2 billion shares with 69% of all trades to the downside. New highs were 35 a slight drop from yesterday’s 52. New lows were a stunner though coming in at 109.
These numbers do not point to the market being able to continue any kind of advance on Friday.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 12 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 50 day simple moving average (SMA) but back below the 20 day simple moving average (SMA). It is also below the 2075 level. During the drop intraday, the S&P hit the 50 day simple moving average (SMA) and bounced off it. This is a good sign and indicates that many investors are still in the market and trading.
The 100 day moving average looks to be on top of the 200 day. By tomorrow it may move above it. This will be a major buy signal.
The closing candlestick on Thursday is bullish for a bounce but bearish for any kind of sustainable rally.
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 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 again on Thursday despite the selling.
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 but trending sideways.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative 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 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 down for stocks.
Stock Market Outlook for Tomorrow – Friday May 13 2016
The technical indicators at the close on Thursday now show four negative indicators and two positive ones. For Friday the market may try to bounce but with retailers losing momentum, any rally will be short-lived.
The general outlook for the moment is for the weakness in the markets to continue. On Friday I would expect a bounce probably in the morning and then selling. For now the overall outlook remains lower for equities until a new catalyst can be found that will turn investors back to the bullish side of the market.
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