Stock Market Outlook for Dec 30 2019 – Santa Claus Rally Continues

Friday Dec 27 saw stock indexes reach new highs intraday but close off the highs with a flat end to the day.

For the week, returns were still quite good but volume was among the lowest for a Christmas week in many years.

Stock Market Outlook Chart Comments At The Close on Fri Dec 27 2019 

The SPX chart continues to be bullish. The closing candlestick on Friday was bullish for Monday but was once again just inside the Upper Bollinger Band. Despite this, the Upper Bollinger Band is still rising while the Lower Bollinger Band has turned sideways, which is normally bullish for the index.

All the major moving averages are still climbing and there are three support levels in place. 3100 and 3075 are both light support with better support down at 3000, which is 7.4% below Friday’s close and would mark a normal correction in a bull market should we get a 5% to 7% correction in January.

Stock Market Outlook review of Fri Dec 27 19

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is positive but dipped back on Friday.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Friday Dec 13. On Fri Dec 27, the up signal was still very strong.

• 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 signal is still overbought but dipped lower on Friday.

• 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 is extremely overbought and has a weak down signal in place.

• 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 signaling very 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 lower.

• 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:

3250 is resistance

3100 is light support

3075 is light support

3030 is light support

3000 is support

2960 is light support

2950 was light support

2900 is light support

2860 is light support

2840 is support

2800 is strong support

2795 is light support

2745 to 2750 is light support

2725 is light support

2700 is light support

 Stock Market Outlook for Tomorrow – Dec 30 2019 

Monday saw the technical indicators lose some strength with most of them dipping. The Slow Stochastic issued a weak down signal for Monday and with the index overbought, we will probably see a drop lower intraday on Monday.

However despite the signals of weakness, a higher close is still expected for Monday as the Santa Claus Rally looks set to continue for yet another day.

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