The market outlook for Thursday was for stocks to take a breather but if they didn’t then I expected one on Friday.
The market is now extremely overbought and technically with the 2025 level pushed through and the market having reached 2046 during the day before closing at 2040.59, the market move higher is seeing more 52 week highs but extremely overbought signals.
Stock Market Outlook – Advance Decline Numbers
Volume rose again on Thursday to 4.54 billion shares. New highs picked up in the afternoon with 176 new highs and just 14 new lows. This is the best showing so far this year for new highs and the first triple digit new highs since January.
77% of all volume was to the upside and 77% of all stocks on New York were rising.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook – March 17 2016
Stock Market Outlook: Stock Chart Comments:
The S&P closed above the 200 day moving average again on Thursday. The closing candlestick was bullish but indicative of an overbought market with short tails at both ends of the candlestick.
The 20 day simple moving average (SMA) now at the 100 day and will cross over it on Friday issuing another buy signal for stocks.
The Upper Bollinger Band is still turning higher and could move the Bollinger Bands away from a potential Bollinger Bands Squeeze. The 50 day simple moving average (SMA) is turning back up as well.
The 200 day is still leading the market followed by the 100 day but if the 20 day simple moving average (SMA) crossed up and over the 200 day it will be a major buy signal and will be followed by the 50 day moving above both the 100 and the 200 day moving averages.
Stock Market Outlook: Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015.
2100 is resistance.
2075 was light support and is now resistance. Below that is 2050 which is resistance.
Light support is at 2000.
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.
1870 is support. 1840 continues to be support. The 1820 level is light support. The strongest support level is at 1800.
1775 and 1750 are both critical support for the present bull market. While 1775 is important it is 1750 that is the bottom line.
A break of 1750 would mark a severe correction from the all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.
Stock Market Outlook Technical Signals
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and moving sideways.
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 Feb 16 which continued to be weak on Thursday.
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 positive, overbought and rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and higher. The signal at the close was a drop to 5.90. This is still a high reading but the drop in the Rate Of Change has been steady which indicates that higher prices are dwindling meaning interest in buying stocks as they rise further is starting to drop off.
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 is neutral to down for stocks and is extremely overbought.
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 it is set for daily. The Fast Stochastic is neutral for stocks and is extremely overbought.
Stock Market Outlook for Tomorrow – Friday Mar 18 2016
All the technical indicators are still positive for the stock market outlook. The problem now is the extreme overbought condition mixed with the rise nearing the 2050 level. The rally may not have much further to run until earnings for the quarter start to show there is improvement from the last quarter.
The drop in the price of oil and the decline of the US dollar are helping stocks but on their own they can only push the indexes so high.
This does not mean the overbought market will fall apart but it does mean that a dip or pullback to regroup can happen at any time. Friday may see another push higher but I am expecting weakness and a dip on Friday. If that does not happen and Friday closes above 2050, I would expect a dip in stocks on Monday.
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