The action last week was a bit discouraging early in the week after the return from the long weekend. Volumes did pick up but “negative” comments on interest rates from the ECB and Fed officials, combined with a plunge in oil mixed with the inability of the market to break higher, finally sent stocks lower on Friday. A lot of the action on Friday though reactionary. Investors have waited for some kind of “signal” to tell them either to take profits or prepare for a break-out. When stocks began to fall on Friday on heavy volume in the morning’s first hour, that was all it took for investors to join the selling. The number of stocks that were sitting near 52 week highs was over 250 and almost all of them were hit on Friday as investors took their profits on stocks that had rallied the best. It was the biggest one day drop for equities since late June.
S&P Index Close
The S&P index closed at 2127.81 down 53.49 points for a loss of 2.45%.
Dow Jones Index Close
The Dow Jones lost 394.46 points to close at 18,085.45 for a drop of 2.13%. Once more the 18,000 level looks in jeopardy for the Dow.
NASDAQ Index Close
The NASDAQ lost 133.57 points to close at 5,125.91 down 2.54%.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook: Chart Comments:
The SPX closed at the 100 day moving average on Friday. The drop broke through the 20 day and 50 day moving averages and left behind a very bearish candlestick to start the week. It also left behind an extremely oversold market.
All the major moving averages are continuing to climb although I now turning down. The Bollinger Bands Squeeze is starting to end.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels.
The market is trying to build some support at the 2180 level. At present this is now resistance.
2160 is 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 negative and falling but it is not strongly negative despite the drop on Friday.
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 August 1. That sell signal was stronger on Friday.
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 falling toward being oversold.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and falling indicating lower prices are ahead for stocks.
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 for the start of the week.
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 Stochasticis has a down signal in place and an extremely oversold K% 0.00 signal which almost always is followed by a bounce.
Stock Market Outlook for Tomorrow – Sep 12 2016
The stock market outlook for Monday is for a bounce attempt probably in the morning, that I am expecting to see fail. There are no positive technical indicators to start off the week. The S&P index ended the day on Friday at the lows of the day and at the 100 day moving average. Normally this type of drop is followed by a bounce.
The drop in the market on Friday was exaggerated to the downside by sellers. I would expect a bounce before more selling but these kinds of drops have been seen often in the past and followed by weakness and then a recovery. The problem is with the chance of an interest rate increase announcement next week still being possible, stocks this week will remain volatile and have a hard time climbing.
Caution is definitely warranted and the market direction is presently lower even if there is a bounce back on Monday.
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