On Tuesday the market dropped from the outset in a pattern similar to Monday’s drop. The difference though was Tuesday’s drop was deeper at the outset and saw rising volume as more investors took profits or simply were selling to move to the sidelines and raise cash. The day ended with the index down 28 points for a total loss this week of 50 points which wipes out the gains from last week. The close was at 4134. Let’s see what the closing signals can tell us about Wednesday’s market.
Stock Market Outlook Chart Comments At The Close on Tue Apr 20 2021
The Upper Bollinger Band is starting to turn sideways while the Lower Bollinger Band has moved back above the 100 day. Both of these are bearish signals.
The closing candlestick on Tuesday is bearish for Wednesday.
The 21 day moving average is climbing higher away further away from the 50 day moving average which is bullish.
The 50, 100 and 200 day moving averages are all climbing higher.
Overall the S&P chart is bullish but there are a few warnings signals as noted above.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling further.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday March 29 2021. On Tuesday the up signal lost a lot of strength.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is falling and no longer signaling overbought.
- Settings: 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.
Slow Stochastic: The Slow Stochastic has a down signal in place and is showing the index as still overbought.
Settings: 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.
Relative Strength Index: The RSI signal is falling and no longer overbought.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is falling which is signaling that bigger swings in prices are not expected.
- Settings: 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. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
4150 is light support
4100 is light support
4070 is very light support
4050 is light support
4000 is Support
3900 is support and the 50 day is just above this at 3933.
3850 is support
3800 is support and the 100 day is just above this level.
3750 is good support
3700 is light support
3680 is light support
3600 is strong support and the 200 day is just above this level.
Stock Market Outlook for Tomorrow – Wed Apr 21 2021
On Tuesday the index closed with the nearest support level at 4100, 34 points lower.
The technical indicators however are signaling that stocks are not as overbought. While a bounce can be expected for Wednesday the expected decline in Netflix could impact the market as a whole and move stocks lower.
We could see the SPX rally but almost as easily fall to 4100 on Wednesday.
Whichever happens, the market is still bullish and the selling should slow shortly.
There is still a good chance for the index to close higher on Wednesday.