A variety of reasons were given for the market downturn on Tuesday but historically, this was one of the poorest starts to November. The biggest culprit named was what many investors believe is a growing uncertainty about the outcome of the elections. A second reason talked about was the decline in out futures down to $46.30. A rise in the US dollar was yet another reason. As well the Fed meeting continues on Wednesday with a 2:00 PM speech that very few analysts believe will indicate an interest rate increase in November, but if it happened, it would be a stunner. Last of course were more concerns about earnings which are continuing to show a decline over the previous quarter and for the same quarter last year. All together these events helped to push the S&P to its lowest level in 4 months.
S&P Index Close
The S&P index closed down 14.43 points to 2,111.72 for a loss of 0.7%.
Dow Jones Index Close
The Dow Jones closed down 105.32 to 18,037.10 for a loss of 0.6%.
NASDAQ Index Close
The NASDAQ lost 35.56 points to close down 0.7% at 5,135.58.
Stock Market Outlook: SPX Chart Comments At End Of Day:
Stock Market Outlook Chart Nov 1 2016
The drop on Tuesday left behind a bearish candlestick. During the sell-off the S&P fell below the 200 day moving average which is the first time in 4 months. It closed the day well below the 100 day moving average. The closing candlestick is bearish but often a bounce can start from this large a drop. You can asee similar candlesticks in mid-October and again in September but note how usually before the bounce gains momentum to the upside there are false bounces and additional pullbacks before the market regains its footing. Therefore on Wednesday be prepared for a bounce but then a probable retest of the 200 day moving average.
The 20 day moving average is still below the 50 day moving average and falling quickly toward the 100 day. That would be a much stronger sell signal on the market if the 20 day moves below the 100 day. Note how the 5 day is starting to drop precipitously toward the 2150 level.
The 100 day moving average is now falling although the 200 day continues to move higher.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels to be aware of.
2180 is resistance.
2150 is resistance.
2125 is resistance.
2100 is light support.
2090 is very light support.
2075 is also light support
Below that is 2050 which is light support.
2025 is better support than 2050.
2000 is primary support.
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 any support.
Stock Market Outlook – Technical Indicators At The Close
The reporting of the technical indicators is changing and Relative Strength Index (RSI) has been added.
Stock Market Outlook Technical Indicators Nov 1 2016
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and falling. At 98.70 this is not the strongest negative trading over the past several months as you can see in the chart above. Instead it is weak but there is still buying interest which is keeping momentum from falling deeper. Nonetheless though, it is still negative.
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 Oct 28. The sell signal is gathering strength.
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 use for the 1 to 3 month S&P 500 chart when I have it set for daily views. The Fast Stochastic has a down signal in place and is starting to entering oversold readings.
Relative Strength Index (RSI) : For the Relative Strength Index (RSI) I use a period of 5 which is a week of activity and is often quite accurate. You can see that is shows the market as very oversold. Normally this deep an RSI reading results in a bottoming and a rebound of some kind, even if only for a day or two.
Stock Market Outlook – Nov 1 2016
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 very negative and you can see that a bounce may be in the works as defined by the Ultimate Oscillator.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is strongly negative and indicates that lower prices lie ahead.
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 has a down signal in place and is also entering oversold readings.
Stock Market Outlook for Tomorrow – Nov 2 2016
All the technical indicators show the market as negative and in general most are oversold and signaling a bounce.
My outlook for Tuesday had been for a bounce, especially since it was the start of November which is a bullish month for equities. There is no doubt that negativity abounds and stocks are falling with some sectors definitely hit harder than others. However often a drop is needed to weed out those investors who are not selling or buying and build a support base to move higher from. The market may open the day lower on Wednesday but then try to rally. Be prepared for another bounce attempt on Wednesday that will probably fail. The market definitely seems intent of reaching 2100 to test for support there.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links
IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info