Stock Market Outlook for Aug 28 2020 – Sideways, With An Up Bias

Thursday saw the S&P break 3500 but then dip back to end the day at 3484.

In the early afternoon a large thunderstorm resulted in a power loss and I was unable to complete the day. My power was restored around 3:00 AM on Friday so there won’t be a lot of articles to start the day for Friday.

Stock Market Outlook Chart Comments At The Close on Thu Aug 27 2020 

On Thursday the closing candlestick is neutral for Friday following a dramatic push to 3500 on Thursday. The dip back below which resulted in a slight gain on the day left the neutral candlestick.

Note that while the Upper Bollinger Band continues to rise, the Lower Bollinger Band has now reached the 50 day moving average.

There are still 6 up signals and one down signal caused when the Lower Bollinger Band moving above the 100 day moving average back on July 27.

The 21, 50, 100 and 200 day moving averages are continuing to climb. The SPX chart is still more bullish than bearish but the move of the Lower Bollinger Band to the 50 day could be a signal we will see some weakness on Friday or for the start of next week.

Stock Market Outlook review of Thu Aug 27 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 24. That signal was stronger at the close of trading on Thursday.

• 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.

• 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 rising and extremely 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.

• 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:

3500 is resistance

3450 is resistance

3400 is support

3375 is support

3300 is support

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

 Stock Market Outlook for Tomorrow – Fri Aug 28 2020 

For Friday the index is looking at a weaker day with a lot of sideways action. MACD is still strongly up whereas a number of the other indicators are signaling lower.

The market is heavily overbought. The Lower Bollinger Band has risen to the 50 day because the sideways action of the past several days has slowed the advance of the 50 day moving average. Usually if the Lower Bollinger Band moves above the 50 day in a rally, the rally slows and can even end. This rally however is quite strong. Therefore, while the S&P is facing a very overbought market for Friday, the outlook is for a sideways day to develop but the bias remains still higher overall.

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