Today was all about the Fed FOMC minutes and investor fear of a possible interest rate increase in June. The market spent the morning climbing to above 2050. Then early afternoon, the market climbed to 2060 as investors hoped the minutes would should no possible rate increase until the fall at the earliest. Instead at 2:00 PM the report showed a strong desire by the Fed to raise rates in June. Stocks tanked and by 2:30 they had fallen to 2034.49.
This was the low point for the day and investors stepped in to buy. With volume to the downside at its highest level of the day, buyers pushed back and the S&P had two rallies. The first reached 2048.35 by 3:04 and the second rally was into the close, ending the day at 2047.63 for a slight gain of 0.42. Essentially the S&P was flat on the day.
S&P Index Close
The S&P closed at 2047.63 on Wednesday.
Dow Jones Index Close
The Dow Jones closed down 3.36 points to close at 17,526.62.
NASDAQ Index Close
The NASDAQ closed up 23.39 points at 4,739.12.
Stock Market Outlook – Advance Decline Numbers
Volume on Wednesday was at 4.1 billion shares. Of those shares traded 64% were lower by the close and 35% were higher. 64% of all stocks were falling. New highs fell back to 44 and new lows rose to 34.
The NASDAQ traded 1.86 billion shares with 35% of all volume moving lower and 64% moving higher. New highs were lower again though at just 22. New lows were also lower, down to 55.
The volume improved today but still points to weakness. The weakness levels though are not overly strong but instead point to sideways trends with a bias more to the downside than upside.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook: Chart Comments:
The S&P closed below the 20 day simple moving average and the 50 day moving average. It did reach the Lower Bollinger Band and moved slightly above it by the close. The closing candlestick is somewhat neutral for Thursday with no clear bias for a move up or down.
The 100 day has moved above the 200 day moving average which is a longer-term buy signal. The S&P is below the 2050 support level again but well within range of retaking it in any kind of 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 slightly negative but trying to climb back to positive.
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 Wednesday but is still pointing to a sideways pattern rather than a big up or down move for the market.
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 negative and trying to rise.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and falling which indicates prices in general are still moving lower.
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 neutral to up for stocks which matches the closing candlestick’s indecisiveness.
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 and is oversold. A slight rally on Thursday could see a buy signal from the Fast Stochastic.
Stock Market Outlook for Tomorrow – Thursday May 19 2016
Technically the indicators are still slanted to negative as they have been for quite a few days. There is always the chance for a bounce back though as investors are still bullish. There is a lot of negative sentiment now, especially after today’s FOMC report. That could be the trigger to push stocks higher.
With a lot of indecisiveness among many of the technical indicators, the outlook for Thursday is still sideways with a bias lower. But remember, there is always the chance for a bounce back rally.
The Walmart earnings which come before the market opens on Thursday could pull the index lower if their earnings disappoint as much as the other big department store retailers have done.
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