The drop in stocks on Monday was pretty well a foregone conclusion thanks to North Korea and the continuation of their nuclear program. However investors are also worried over the potential damage from another Hurricane. As well FOMC Lael Brainard in a speech on Tuesday indicated her concerns over the low inflation readings. A lot of investors and analysts felt that this was another sign that interest rates were probably not set to rise again shortly. That sent the both market spinning and the dollar rose. It also means that financial stocks that many analysts believed would benefit from higher interest rates may be overpriced and financials on Tuesday were the worst performing sector. In the end it was the worst day for the market since August 17.
The S&P index ended down 18.70 to 2457.85
Dow Jones Index Close
The Dow Jones ended down 234.25 to 21,753.31
NASDAQ Index Close
The NASDAQ closed down 59.76 to 6375.57
Stock Market Outlook
Stock Market Outlook review Sep 5 17
Chart Comments At The Close:
The S&P on Tuesday fell through the 21 and 50 day moving averages and broke below 2450 before recovering and closing above it. That also left the index back above the 21 and 50 day moving averages. However the 21 day is now crossing below the 50 day which is a major sell signal on the markets.
The problem on Tuesday was also the rally last week which by Friday had showed signs of running out of steam. Tuesday, even without the North Korea issue, may have been a down day anyway.
The closing candlestick on Tuesday was bearish for Wednesday.
Until the S&P closed below 2430, the pullback today still does not create a lower low.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive but pulling back.
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 Aug 31. The buy signal continued today.
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 and falling.
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 an up signal still in place for Wednesday but there are signs it may turn into a sell signal shortly. The Slow Stochastic shows the market as overbought.
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 often is the first indicator to show an overbought or oversold signal. The RSI signal is falling and no longer signaling 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. The rate of change signal is negative and falling.
Support Levels To Be Aware Of:
The market has light support at 2450 and good support at 2425. There is also light support at 2400, 2380, 2350 and 2300.
Stock Market Outlook for Tomorrow – Wed Sep 6 2017
4 technical indicators are still positive and one turned negative after the selling on Tuesday. All the indicators took a hit however and are moving lower.
Wednesday looks more like the market will open a bit lower and try to rally shortly after. The day though still looks weak without a catalyst to move the market back up there could be a retest of 2450.
Investors are pretty used to the market selling off and then running right back up. But on Wednesday we may find that the markets are weaker. With weakness comes the possibility of a negative close for a second day as the market may need a day to try to stabilize before buyers step back in.
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