Review of Tue Mar 20 2018
Summary:
The day on Tue Mar 20 2018 felt steadier for stocks despite revisiting the 2710 level and closing only 7 points above it. Facebook Stock continued its decline but on Tuesday Caterpillar and Boeing helped to lead the market higher.
Oil prices rose on middle east tensions which helped the energy sector. Facebook managed to recover some of the losses intraday to close down 2.56% but other social media companies also fell including Snap which is down 2.5% and Twitter which is down 10.3%.
Oracle stock fell 9.4% after reporting lower than expected quarterly revenue.
After hours FedEx Stock reported better than expected earnings beating estimates and they raised their guidance for 2018.
Salesforce.com stock fell 3% after hours on news that it was acquiring MuleSoft for $6.5 billion.
Closing Statistics:
S&P 500 Index up 4.02 to 2716.94
Dow Jones Index up 116.36 to 24,727.27
NASDAQ Index up 20.06 to 7,364.30
Stock Market Outlook Chart Comments At The Close:
The S&P closed below the 50 and 21 day moving averages on Tuesday but off the 2700 and 2710 level.
The action on Tuesday left behind a bearish candlestick for Wednesday and the index within a few points of the 100 day moving average.
The 50 and 100 day moving averages have stopped climbing and are instead trending sideways.
The 21 day moving average is starting to turn back down signaling more downside action is expected.
The 50 day moving average is falling and the Lower Bollinger Band has moved to the 100 day moving average but is showing signs of falling lower.
The Bollinger Bands Squeeze is still in play and now looks like it may send the index lower. The chart is bearish.
Stock Market Outlook Review of Tue Mar 20 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and 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 March 5. Today MACD issued a sell signal that has to be confirmed.
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 starting to rise.
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.
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 trying to turn back up.
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 moving sideways, unchanged for Wednesday.
Support Levels To Be Aware Of:
2745 to 2750 was light support
2710 is light support.
2700 is good 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 – Wed Mar 21 2018
Technical indicators are pointing to the S&P moving lower on Wednesday and a new sell signal from MACD adds further weight to the bearish side of the market. MACD is not yet confirmed down, so there is still some hope yet.
While the chart is bearish and the technical signals are bearish the market on Wednesday will dance to the tune of the Federal Reserve Chair Jerome Powell.
The decision on whether to raise interest rates appears to be a foregone conclusion as 94% of analysts surveyed believe rates will move up a quarter of a point.
However a half point move has been mentioned by some analysts. That would stun investors and send stocks into a tailspin. I doubt that will occur.
Following the Federal Reserve Chair Jerome Powell news on interest rates, we might see stocks bounce initially and then move lower. 2710 and 2700 are keys to the present market. A break of those levels is not expected, but volatility can surprise with strength to the downside so it is always best to be prepared for any eventuality when it comes to the Federal Reserve and interest rates.
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