Stock Market Outlook for Aug 14 2020 – Mixed, Overbought But Still An Up Bias

Thursday saw the S&P trade within a tight 20 point range between 3385 and 3365 in a day of lower volume as investors wait to see if a stimulus package deal can be reached.

Stock Market Outlook Chart Comments At The Close on Thu Aug 13 2020 

The Upper Bollinger Band moved higher again on Thursday but the closing candlestick ended the day bearish for the final day of the week, Friday.

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 is trending just below the 50 day moving average indicating how tight the trend higher has stayed.

The 21, 50, 100 and 200 day moving averages and continuing to climb. The SPX chart is still more bullish than bearish but a number of the technical indicators are turning bearish.

Stock Market Outlook review of Thu Aug 13 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is still trending sideways.

• 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 Thursday the signal weakened.

• 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 lower.

• 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 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.

• 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.

• 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 – Fri Aug 14 2020 

For Friday the outlook remains mixed and while technical indicators are becoming more bearish, investors are basically on hold waiting for some signal on a further stimulus package from Washington. While the index is sitting in heavy resistance, it still won’t take much to move it higher. The bias continues to stay to the upside. Friday could end up much like Thursday especially ahead of the weekend as many investors will be reluctant to hold many positions over the weekend. Still, the outlook is not changed from generally up.

With a mixed outlook, an overbought market and a potential stimulus package stuck in limbo, Friday could still surprise with a slight gain.

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