The drop on Tuesday was the result of a drop in the price of oil, a rising US dollar, poor earnings from Alcoa and the likelihood of a Democratic sweep of both Houses. All of this unnerved investors who turned to selling.
As usual, more selling dragged in more investors who also turned to selling and by the close the market had broken through key support levels and done some minor technical damage.
It was the worse one-day sell-off since September 9.
S&P Index Close
The S&P index closed down 26.93 points for a loss of 1.24%. It closed at 2,136.73.
Dow Jones Index Close
The Dow Jones closed down at 18,128.66 for a loss of 200.38 points or 1.09%.
NASDAQ Index Close
The NASDAQ had the worse loss falling 1.54%. It lost 81.89 points to close at 5,246.79.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook from Oct 11 2016
Stock Market Outlook: Chart Comments:
All the bearish signals for the last couple of weeks have certainly “panned out” today. Since the 20 day moving average fell below the 50 day moving average the market has had trouble gaining. Then once the index fell below the 50 day moving average the market has been unable to get any traction to the upside that could be built upon for a move higher. All of this culminated in the market falling today.
The closing candlestick was bearish for Wednesday. The index hit the Lower Bollinger Band today, bounced off it slightly but closed at the 100 day moving average.
The 20 day moving average is still below the 50 day moving average but is moving sideways and no longer falling.
The 100 and 200 day moving averages are still climbing and a Bollinger Bands Squeeze is still starting to form.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
The market was trying to build some support at the 2180 level. At present this is now resistance.
2160 was very light support.
2150 is support.
2125 is light support.
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 through to 2090.
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 anything else.
Stock Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum is back negative and falling but considering the extent of the selling, it did not fall into very negative readings.
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 Thursday Sep 22. Today an unconfirmed sell signal was generated.
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 back negative but overall it is still moving sideways rather than actually up or down.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is once more negative but it too is more sideways than up or down.
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.
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 has a down signal in place.
Stock Market Outlook for Tomorrow – Oct 12 2016
All the indicators have changed their outlook to negative. However a drop like we saw on Tuesday is usually followed by a bounce. However I would not expect a large bounce to even a full day’s bounce such as we saw in September when the market sold off on Sep 9 and then rallied all day on Sep 12. Instead I am expecting a smaller bounce and then some selling. I am not expecting a second plunge but the technical indicators do warn that there is the possibility of a move lower than we saw on Tuesday.
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