The stock market outlook for Tuesday was for stocks to move sideways but end the day slightly higher. That was definitely wrong. Instead worries over growth in China mixed with a rise in the US dollar, continuing poor earnings and a decline in energy prices, to send the market indexes lower.
S&P Index Close
The S&P which rose on Monday by 16.13 points dropped 18.06 points on Tuesday to close at 2063.37.
Dow Jones Index Close
The Dow Jones which rose 117.52 points on Monday, fell 140.25 points to close at 17,750.91.
NASDAQ Index Close
The NASDAQ had risen on Monday 42.24 points only to lose 54.37 points on Tuesday to close at 4,763.22.
Stock Market Outlook – Advance Decline Numbers
Volume rose to 4.1 billion shares traded on Tuesday. Down volume dominated with 84% of all trades moving lower along with 74% of all stocks. There were 79 new highs and 27 new lows.
The NASDAQ traded 2.88 billion shares. Surprising down volume was actually better than on Monday. On Monday 60% of all volume was to the downside. On Tuesday 50% was to the downside. Once again the amount of unchanged volume amounted to 36%. There were 37 new highs and 45 new lows.
The stock market outlook from the advance decline numbers are showing some concerns with new highs dropping in both New York and the NASDAQ.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – May 3 2016
Stock Market Outlook: Chart Comments:
The S&P closed below the 20 day simple moving average (SMA). However the intraday low today was higher than the low on Friday. The closing candlestick is often bullish stocks on Wednesday.
The 50 day simple moving average (SMA) is now above the 200 day moving average and the 100 day moving average is ready to move above the 200 day. These are strong buy signals for the market.
The Bollinger Bands are still trending more sideways than up which points to stocks still moving sideways rather than higher. This could change to lower.
As indicated yesterday, stocks need to get back above 2100 quickly or risk losing momentum.
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 also 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 falling.
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 remains strong 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 is positive and falling.
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 down 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 – Wednesday May 4 2016
The technical indicators at the close on Tuesday are 5 negative and only 1 still positive. All the indicators are falling however which signals that the market may pullback on Wednesday.
There are two keys to consider however. The first is that Tuesday’s intraday low was still above Friday’s intraday low which often points to strength not weakness. The closing candlestick is often bullish for stocks.
Monday was obviously a bounce and Tuesday was actually what might have happened on Monday. Historically this is a poor week for stocks in May and with the unemployment number coming on Friday, stocks often are under pressure.
For Wednesday we could still see the market try to regain some footing but overall the stock market outlook remains weak and lower.
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