Stock Market Outlook for Aug 12 2020 – Bounce Attempt Likely

Tuesday saw the indexes climb higher in the morning and through the lunch hour, only to give back the entire rally and end the day considerably lower. We have seen this type of action often this year. Wednesday’s market should give us a better idea whether this is once more just a one day of weakness, or more downside should be expected.

Stock Market Outlook Chart Comments At The Close on Tue Aug 11 2020 

The Upper Bollinger Band turned sideways on Tuesday and the closing candlestick ended the day bearish for Wednesday.

There are now 6 up signals and one down signal when the Lower Bollinger Band moving above the 100 day moving average back on July 27. At present the Lower Bollinger Band turned up slightly which you can see in the chart. If it moves above the 50 day moving average, it will signal a potential move lower for the index.

The 21, 50, 100 and 200 day moving averages and continuing to climb.

Stock Market Outlook review of Tue Aug 11 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling.

• 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 Aug 3. On Tuesday the signal was weaker.

• 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 only slightly 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 extremely 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 sideways indicating no large change in prices is 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:

3375 is resistance

3300 is resistance

3275 is support

3200 is support

3150 is support

3050 is support

3000 is support

2975 is light support

2950 is light support

2900 is light support

2860 is light support

2840 is light support

2800 is good support

2725 is light support

2700 is light support and marked a drop of 20.4%.

2500 was good support and marked a correction of 26.3%

2191 was the market low on March 23

 Stock Market Outlook for Tomorrow – Wed Aug 12 2020 

For Wednesday the selling on Tuesday should see the day start with a bounce attempt. The question is whether Tuesday’s selling was an indication the index needs to be move lower to find support before pushing higher again, or whether it was a one day sell-off while and Wednesday will end higher.

At present the indicators are pointing to the market as attempting a bounce but probably closing flat to lower on Wednesday. The overall rally however is not over but this could be a breather for the markets.

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