Friday Feb 9 saw another sharp decline and rising sell orders as the indexes pushed lower. The lunch hour and afternoon saw the indexes fall to their lowest levels so far in the ongoing correction. However once the S&P hit the 200 day moving average buyers finally started to show up. By the end of the day the indexes had taken the losses and bounced the markets back to positive closings. It was the end to what was an exceptionally ugly week for stocks.
Closing Statistics for Fri Feb 9 2018
S&P 500 Index Close
The S&P index ended up 38.55 to 2619.55
Dow Jones Index Close
The Dow Jones ended up 330.44 to 24,190.00
NASDAQ Index Close
The NASDAQ closed up 97.33 to 6874.49
Stock Market Outlook – Review of Fri Feb 9 2018
Chart Comments At The Close:
Friday the market broke through the 200 day moving average and then bounced, closing at the Lower Bollinger Band. The Lower Bollinger Band is rapidly falling which is bearish and is now below the 50 and 100 day moving averages. The 21 day and 50 day moving averages are turning lower while the 100 day is turning sideways. Only the 200 day moving average is still climbing.
The close on Friday left behind a bearish reversal candlestick. This means the chance for a rebound on Monday is good or at least a bounce and even a possible positive close, but the outlook is still lower in the following days.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and falling deeply.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a sell signal on Jan 31. On Feb 9 the sell signal was stronger again despite the late day rally.
Ultimate Oscillator: 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. The Ultimate Oscillator signal is negative and rising.
Slow Stochastic: 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. The Slow Stochastic has a down signal in place for Monday and is still oversold.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. The RSI signal is rising.
Rate of Change: 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. The rate of change signal is oversold and rising.
Support Levels To Be Aware Of:
2675 and 2620 were light support.
There is good support at the 2550 level.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be almost 15%.
Stock Market Outlook for Tomorrow – Mon Feb 12 2018
For Monday the technical indicators are advising that the chance for a further bounce is reasonably good but there are still sellers waiting who are not going to “chance” that this just a correction and not something worse. When it comes to capital at risk of loss, institutions will dump shares as quickly as they can in a rally should they think there is more downside ahead and they can buy back in at a cheaper price.
For Monday then, a rally looks good for the start but a drop could follow and then a further rally. A positive close is expected, no matter how slight. Then we can see what Tuesday looks like. The heaviest selling could be over for now and that will help build some confidence but rarely does this type of correction simply end like we saw on Friday. So a bounce is likely but it is highly suspect for the following days. I will remain cautious on Monday.
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