Market Sits at Important Inflection Point

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Friday marked the sixth lower close in the past seven sessions. The broader market S&P 500 ended the week up just 1.3%, when it had been up almost three times that much less than two weeks ago.

The upcoming Brexit vote and falling oil prices have been weighing on stocks recently. Oil futures, which traded above $50 a barrel earlier this month, closed last week at $47.98 even with Friday’s 3.8% advance. For the week, they were down 2.2%.

Gold, which recently many investors have likely been buying as a hedge against a U.K. exit from the EU, lost 0.3% on Friday at $1,292.50 an ounce. This was due in part to Friday’s polls indicating a shift among voters toward staying in the EU. The pound rose more than 1%.

Traders were treated to another confusing statement by a member of the Federal Reserve. This time around it was the normally reliable St. Louis Fed President James Bullard, who said only one rate hike may be needed through 2018.

At Friday’s close, the Dow Jones Industrial Average fell 58 points to 17,675, the S&P 500 was down 7 points at 2,071, the Nasdaq was off 45 points at 4,800, and the Russell 2000 lost 3 points at 1,145.

The NYSE Composite’s primary exchange traded 1.3 billion shares with total volume of 4.8 billion. The Nasdaq crossed 2.5 billion shares. On the Big Board, advancers outpaced decliners by 1.6-to-1, and on the Nasdaq, decliners led by 1.2-to-1. Blocks on the NYSE increased to 7,533, up from 5,234 on Thursday. Increased volume and block trading was probably due to Friday’s quadruple witching — when index, index futures, stocks and single-stock futures — all expire on the same day.

For the week, the Dow fell 1.1%, the S&P 500 lost 1.2%, the Nasdaq was off 1.9% and the Russell 2000 declined 1.6%.

VIX Chart
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You can see on the chart where mixed signals from the Fed plus the potential Brexit equaled uncertainty that caused a spike in the Volatility S&P 500 (VIX). But polls showing British voters leaning toward staying in the EU and Fed voting member Bullard’s comments about only a single rate hike potentially being needed through 2018 seemed to settle the VIX and the stock market.

S&P 500 Chart
Click to Enlarge

Chart Key

The 50-day moving average of the S&P 500 at about 2,080 appears to be an inflection point. An inflection point is usually defined as a high or low that comes immediately before a market move in the opposite direction.

Note the buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR) on Thursday, when the index closed within a fraction of the 50-day moving average.

Conclusion

My CBR indicator has a special rule: If a close declines beyond the direction of the signal within five sessions, that signal is not only cancelled but takes on the strong warning of a move in the opposite direction.

For example, Thursday’s range was a high at 2,079.62 and a low at 2,050.37 with a close at 2,077.99. Friday’s range did not violate Thursday’s buy signal. But if the low at 2,050.37 is violated by this Thursday on a close, the CBR buy becomes a stronger CBR sell signal.

The next support for the S&P 500 is at the oft-mentioned 2,040 line.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/daily-market-outlook-market-sits-important-inflection-point/.

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