The concern over oil and once more interest rate jitters as well as bearish comments on oil despite a bounce kept investors on edge. Sellers were dominant again today and by the close there are cautionary flags on the stock market outlook for Wednesday and probably Thursday.
S&P Index Close
The day started with an immediate drop which by 10:00 AM had the S&P down to just below the important 2045 valuation. This brought a rally into place but the rally pushed only to 2055 before weakness again set in. Stocks drifted lower through the lunch hour but an afternoon rally then ensued which by 3:00 PM had to S&P up to just 2053. The inability of the market to break above the morning rally high brought in sellers. The last hour also saw a spike in volume as computer trades sent the market to the day’s low of 2042.56. A last minute spike held the close to 2045.17, right at the important 2045 level. On the day the S&P lost 1.01% as it fell 20.96 points.
Dow Jones Index Close
The Dow Jones followed the S&P on Tuesday including the late in the day plunge. The close saw the Dow down 133.68 points for a loss of 0.75 to close at 17,603.32.
NASDAQ Index Close
The NASDAQ pretty well matched the S&P with a loss of 47.86 points or 0.98% to close at 4843.93 on the day.
Stock Market Outlook – Advance Decline Numbers
Volume was heaviest in the last 45 minutes of trading with 4.1 billion shares traded. 66% of all volume was moving lower along with 67% of all stocks. New highs moved below 100 to just 93 while new lows picked up slightly to 21.
The percentage of stocks and volume to the downside on Tuesday was actually better than on Monday despite the decline in new lows. These numbers though still point to more weakness.
Stock Market Outlook – Technical Indicators At The Close
Stock Market Outlook for Apr 5 2016
Stock Market Outlook: Chart Comments:
The S&P closed above the 200 day moving average but below the Upper Bollinger Band. The Upper Bollinger Band though is still moving higher which signals the market has more upside ahead.
The S&P fell to the 200 day moving average today before bouncing slightly at the close. Any selling on Wednesday ill push the S&P below the 200 day moving average fort the first time since March 10.
The 20 day simple moving average (SMA) is still rising higher after crossing above the 200 day exponential moving average (EMA) another sign of further advancing for the index.
The 50 day moving average is continuing to turn up and as you can see in the chart the 100 day is also now turning higher and by the end of the week or next week it could cross up and above the 200 day. This would be a major buy signal if it happens.
The Lower Bollinger Band is moving higher but signs of a possible Bollinger Bands Squeeze are still evident and could happen as early as Thursday.
The 200 day is still leading the market followed by the 100 day and we should stay aware of that indication, as medium-term it remains a bearish sign. The chart pattern no longer suggests the market will move higher. Today’s closing candlestick was bearish for Wednesday.
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 now light support.
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 negative and moving lower.
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. Today MACD issued a sell signal which must 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 is positive but falling rapidly.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but falling which indicates prices being paid are 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 is signaling down for stocks and is 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 down for stocks and is overbought.
Stock Market Outlook for Tomorrow – Wednesday Apr 6 2016
The technical indicators are now split with 3 sell signals and 1 negative. Only two are now positive. A rally in the price of oil on Wednesday could move stocks higher but in general the stock market outlook is lower. If stocks do not move lower on Wednesday, they most likely will on Thursday. Oil has to push back to above $38.00 to get stocks moving higher again. The last hour today saw heavy trading and the S&P quickly reached the 200 day moving average. It appears likely stocks will move below the 200 day moving average on Wednesday which will be a sell signal. For Wednesday stay cautious as the bias is still lower for stocks.
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