The stock market outlook for Thursday was for stocks to move sideways and keep a slightly lower bias. I did not expect much of a dip but historically volumes decrease heading into Memorial Day Weekend. Those dips though made big profits for the Spy Put Hedge Trade today.
News today included US pending home sales surged to a 10 year high. That’s something the Fed will be watching for a decision on June interest rates.
Durable Goods orders jumped which often indicates the economy is starting to pick up once again. This is another thing the Fed watches.
Weekly Initial Unemployment Insurance Claims fell to 268,000. Analysts now believe the last couple of months when we saw increases in the number of Weekly Initial Unemployment Insurance Claims applicants was just a slow down or slow period. They now believe unemployment will drop further in coming weeks.
Gold was lower again today by $3.40 to 1220.10 and so was the US dollar. West Texas Intermediate Oil flirted with $50 a barrel again today.
S&P Index Close
The S&P closed at 2090.10 down just 0.44 points.
Dow Jones Index Close
The Dow Jones closed down 23.22 at 17,828.29.
NASDAQ Index Close
The NASDAQ closed up 6.88 points to 4901.77
Stock Market Outlook – Advance Decline Numbers
Volume on Thursday plunged 630 million shares to just 3.17 billion shares by the close. 42% of all volume traded on New York was to the upside while 57% was to the downside. Meanwhile 50% of stocks were advancing while 47% were declining. New highs came in at 73 and new lows at 17. This was just a bit of a change from yesterday when we saw 88 new highs and 11 new lows.
The NASDAQ traded 1.57 billion shares which is far below average and among the lowest volumes this year. 50% of all volume was moving higher while 46% was moving down. 42% of all stocks listed on the NASDAQ were rising while 53% were falling. New highs fell by half to 58 while new lows were almost unchanged at 27.
Not much can be read into the above statistics since this is nearing the start of the long weekend and historically volumes are low.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 26 2016
Stock Market Outlook: Chart Comments:
The S&P closed on Thursday above all major moving averages aand at the Upper Bollinger Band. The closing candlestick is bearish for Friday.
The SPX continues to be led by the 50 day, 100 day and then 200 day which is a signal that the market will move higher.
Today the 50 day moving average moved above the 20 day moving average which is another up signal.
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.
There is light support at 2025.
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 positive and moving sideways.
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 on May 25. The buy signal was confirmed today.
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 rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative to neutral and unchanged.
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 is overbought.
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 overbought.
Stock Market Outlook for Tomorrow – Friday May 27 2016
Once again, the technical indicators are pointing to the market moving higher. That does not necessarily mean the move will be straight up.
Instead, the market has very low volume heading into the long Memorial Day weekend. Normally stocks tend to be weak ahead of this holiday.
I am expecting another sideways choppy day on Friday with a slightly negative close.
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