Stock Market Outlook for Tue Sep 1 2020 – Overbought and Dips

Monday saw a slight dip for the S&P, most of which was at the close of the day. It was a tight trading session with the index several times testing the 3500 level. With the NASDAQ up 9.5% in August and the S&P up 7%, August 2020 is one for the history books marking the best August since the 1980’s. Here’s what to watch for as September gets underway.

Stock Market Outlook Chart Comments At The Close on Mon Aug 31 2020 

On Monday the closing candlestick is bearish for Tuesday following a second close above 3500. The most important signal in the chart on Monday is the Lower Bollinger Band creeping above the 50 day moving average which is bearish and could signal some days of weakness ahead.

There are still 6 up signals and now two down signal caused when the Lower Bollinger Band moving above the 100 day moving average back on July 27 and today above the 50 day.

The 21, 50, 100 and 200 day moving averages are continuing to climb. The SPX chart is still very bullish.

Stock Market Outlook review of Mon Aug 31 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 signal on Monday Aug 24. That signal was slightly weaker on Monday.

• 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 falling 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 indicating investors shouldn’t expect a lot of changes in prices.

• 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 – Tue Sep 1 2020 

Note how just a bit of weakness on Monday, turned all the technical indicators lower. Investors should watch for some dips on Tuesday and a potentially lower close. We could see Apple Stock and Tesla stock both dip lower on Tuesday after opening on Monday with their most recent splits.

The Lower Bollinger Band pushed above the 50 day on Monday which also usually signals a few days or some weakness.

Overall investors are still bullish so any dips will find ready buyers. With the Rate Of Change advising that investors shouldn’t expect prices to change by much, dips on Tuesday are opportunities I plan to use for setting up more trades.

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