The Stock Market Outlook for Monday was for stocks to either close negative or just slightly higher as sellers continue to provide stiff resistance to the advance from 2050.
S&P Index Close
Monday started off with some selling and then choppy trading as the market fell to 2043.14 in the early morning but worked its way higher to push to an intraday high in the mid-afternoon of 2053.91. While selling was not as heavy as Friday, it was still stiff resistance but the S&P managed to close at 2051.60 up 2.02 points.
Dow Jones Index Close
The Dow Jones closed up marginally as well, moving higher by 21.57 points to close at 17,623.87.
NASDAQ Index Close
The NASDAQ also moved higher, closing up 13.23 points to 4808.87.
Crude Oil Up
May contracts for Crude oil closed the day up 38 cents to $41.52 a barrel. Analysts across the board are now overwhelming convinced that crude oil put in a bottom a couple of weeks ago. Many also argue that the collapse of oil below $32.00 was caused by panic and no any fundamentals that could support oil staying below $30 for more than a few days. It was as one analysts put it “hysteria that drove oil lower”.
Stock Market Outlook – Advance Decline Numbers
Volume dropped over 3 billion shares to 3.39 billion on Monday, one of the slowest days this year. 52% of all volume was to the upside and 46% was to the downside. Stocks trading up and down were even closer with 48% of all stocks advancing and 48% declining with 4% unchanged.
New highs were less than half of Friday’s new highs, plunging to just 56 and new lows fell slightly to just 6. Overall the advance decline numbers are not bullish and show stiff resistance and a tight trading range on very low volume.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for Mar 21 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 200 day moving average again on Monday but was almost unchanged from Friday still stuck at the 2050 level. Volume was very light on Monday which could signal that many sellers who wanted out, left on Friday.
The closing candlestick was bearish although the Upper Bollinger Band is continuing to move higher, which is a bullish sign.
The 20 day simple moving average (SMA) is rising higher above the 100 day and could cross up and over the 200 day if the market can grind a bit higher. This will be another buy signal for the S&P.
The 50 day simple moving average (SMA) iscontinuing to turn back up as well.
The Lower Bollinger Band is moving higher and will shortly cross over and above the 50 day moving average which will be another bullish signal for the index.
The 200 day is still leading the market followed by the 100 day.
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. Momentum must start to climb, otherwise the push higher since the Fed induced bounce last Wednesday runs the risk of pulling back as it loses momentum.
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 was weaker again 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 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 unchnged from Friday with a reading of 6.98. This is still a high reading which is indicative of an overbought market. However the rate of change signal indicates that prices are once more flat for equities.
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 up 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 signaling up for stocks and is extremely overbought.
Stock Market Outlook for Tomorrow – Tuesday Mar 22 2016
All the technical indicators are still positive for the stock market outlook for Tuesday.
But the same problem remains, overbought. As explained last night, a market can remain overbought for an extended period of time, but looking at both stochastic indicators and the Ultimate Oscillator, this market has been overbought for quite a while.
Friday’s volume was huge and yet the market hardly budged above 2050. Today’s volume was half of Friday’s and again the market hardly moved. Normally this is indicative of the market ready to dip and take a breather.
I am not expecting a huge drop on Tuesday, just more weakness as the market tries to push once more through sellers to reach 2080 sometime this week.
The stock market outlook for Tuesday looks like stocks may pullback but if they do not, I believe the close will only be slightly higher again on Tuesday. If there is a pullback it should be slight.
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