Investors continued to stay nervous on Wed Feb 28 2018 following the drop of stocks on Tue Feb 27 2018. However today the first half of the morning was reasonably strong and a rally attempt seemed to hold promise. However once selling erupted investors who may have waited at the sidelines hoping for higher prices, felt it was time to get out. The late afternoon from 2:00 into the close was dramatic and the drop in all three indexes was on large volume into the close.
Closing Statistics for Wed Feb 28 2018
S&P 500 Index Close
The S&P index ended down 30.45 to 2713.83
Dow Jones Index Close
The Dow Jones ended down 380.83 to 25,029.20
NASDAQ Index Close
The NASDAQ closed down 57.35 to 7273.01
Stock Market Outlook – Review of Wed Feb 28 2018
Chart Comments At The Close:
The SPX on Tuesday did not close strongly bearish. Indeed only the Slow Stochastic pointed strongly down from a very overbought signal. The Relative Strength Index (RSI) in Tuesday was well below overbought with a reading of 56.48. That means the drop is not technical but emotional. That usually means more selling lies ahead but it will be choppy.
The 50, 100 and 200 day moving averages are still climbing but the 21 day remains below the 50 day. The S&P on Wednesday closed below the 50 day moving average and on top of the 21 day as it nears the 100 day moving average. The candlestick is again quite bearish for Thu Mar 1 2018.
The Lower Bollinger Band is back above the 200 day moving average. However the Upper Bollinger Band is falling so we could see a Bollinger Bands Squeeze at the end of the week or into next week.Overall the chart is not overly bearish.
Stock Market Outlook review of Wed Feb 28 2018
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive but 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 buy signal on Feb 23. The buy signal is losing strength on Wednesday.
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 signal is negative and moving lower.
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 but it is very overbought. Normally at this level there will be some negative days shortly as the market works out being overbought.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. The RSI signal is falling back.
Rate of Change: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline. The rate of change is negative and falling which indicates lower prices are expected.
Support Levels To Be Aware Of:
2700 is now support.
2675 is light support.
2650 is light support and 2620 is also light support.
There is good support at the 2550 level from where the market bounced back from the recent correction.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Thu Mar 1 2018
The outlook for Tuesday was for a drop but not down to 2700. On Tuesday though, it did come close, ending the day at 2713.83. The technical indicators are turning more bearish for Thursday and Friday.
This though, is the second day of steep declines. We should see a better bounce attempt at the outset Thursday morning, but the selling does not look over. I am expecting another negative close on Thursday.
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