Stock Market Outlook for Dec 31 2019 – Weakness Is Expected But Bias Is Still Up

Monday saw stocks give back the gains made last week when trading was shortened by a day and a half and volumes were low. The drop on Monday was 18 points, the same number of points earned last week.

The S&P ended the day at 3221 as investors took profits with the market overbought.

Stock Market Outlook Chart Comments At The Close on Mon Dec 30 2019 

The SPX chart continues to be bullish although the closing candlestick is bearish for Tuesday.

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.

Stock Market Outlook review of Mon Dec 30 2019

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is positive but fell back on Monday.

• 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 Mon Dec 30 the up signal was cut in half.

• 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 not overbought and 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 is extremely overbought and has a 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 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 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 31 2019 

For Tuesday, the technical indicators took quite a hit on Monday and are pointing to weakness for the final day of 2019.

Considering how high the indexes all are for the year, it may not be surprising for the day to be weak on Tuesday.

Despite the selling on Monday though, the technical indicators are still strong enough to point to a potential rise for Tuesday by the close but we should expect weakness throughout most of Tuesday’s trading.

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