Stock Market Outlook for Tue May 15 2018 – Choppy Bias Lower

Stock Market Summary for May 14 2018 

On Mon May 14 2018 Healthcare stocks rose following the release of President Trump’s drug price proposals. Utilities, defense and telecoms were the biggest drag.  The indexes closed higher for another day. The S&P reached the highest level in 2 months before closing below that morning high. The NASDAQ climbed 8 points to stay above 7400 and the Dow enjoyed the longest winning streak since September.

Closing Statistics from Mon May 14 2018 

The S&P rose 2.41 to 2730.13

The NASDAQ Composite rose 8.43 to 7411.31

The Dow Jones Industrial Average rose 68.24 to 24,899.41

Stock Market Outlook Chart Comments At The Close on Mon May 14 2018 

The S&P closed above all the major moving averages and at the Upper Bollinger Band. The signals are now overbought. The closing candlestick is one of weakness which is usually followed by a negative day.

The 21 day moving average is now above the 100 day and ready to move above the 50 day. This is an up signal even if Tuesday is negative at the close.

The chart has become bullish.

Stock Market Outlook review Mon May 14 2018

Stock Market Outlook: Technical Indicators Review:

Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and rising.

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 an up signal on May 7. The up signal gained more strength on Monday.

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 positive and unchanged.

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 signal is up but weakening as it is overbought. We could see a down signal on Tuesday.

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 is often the first indicator to show an overbought or oversold signal.  The RSI signal is unchanged and is also overbought.

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 signal is unchanged.

Support Levels To Be Aware Of:

2745 to 2750 was light support

2710 is light support.

2700 was support.

2675 was light support.

2650 is light support

2620 is light support

2600 is strong support.

There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.

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 – Tue May 15 2018 

For Tuesday the technical indicators are primarily unchanged from Monday and many are also unchanged from Friday. This is a sympton of an overbought market as the technical indicators cannot climb until there is some kind of consolidation of recent gains.

Trading should be choppy on Tuesday with spikes and dips although dips look set to dominate.

Tuesday should end negative but it will not mark the end of the rally, just a day of rest. Weakness on Tuesday presents a possible chance to set up additional trades for when the market resumes the uptrend later this week.

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