Last week saw an excellent rally, the best since 2013 on the S&P. The NASDAQ recovered all the losses last week from the drop in the first week of February. Over 50% of the losses from the recent correction have been recovered by the S&P and Dow. This though, has left the indexes overbought and vulnerable to sellers.
Closing Statistics for Fri Feb 16 2018
S&P 500 Index Close
The S&P index ended up 1.02 to 2732.22
Dow Jones Index Close
The Dow Jones ended up 19.01 to 25,219.38
NASDAQ Index Close
The NASDAQ closed down 16.97 to 7239.46
Stock Market Outlook – Review of Fri Feb 16 2018
Chart Comments At The Close:
Friday saw the index closed above the 50 day moving average. Intraday it pushed to the 21 day moving average midway through the lunch hour. It was rejected as sellers arrived and push the index back. It closed just above the 50 day but left behind a bearish candlestick for the start of the week. The Lower Bollinger Band is on the verge of breaking to the 200 day moving average which would be bearish, after breaking through the 50 and 100 day moving averages. Overall though the index is now sitting right at open of trading from Feb 5. Weakness should be expected in the morning at least, on Tuesday.
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and rising.
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 16 the sell signal continues to lose strength.
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 positive and moved lower on Friday.
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 strong up signal still in place.
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 although it was flat on Friday but it did not fall back.
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 still rising.
Support Levels To Be Aware Of:
2700 is now resistance.
2675 is light support.
2650 is light support and 2620 is also light support.
There is good support at the 2550 level from where the market bounced back from the recent correction.
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 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Tue Feb 20 2018
The technical indicators improved further on Friday despite the weak close. That weak close probably set the index up for a weak open on Tuesday. The rally has been fast and many analyst say it was too fast. That could be the case as it has left the index overbought and weak against sellers. A move to try to retake 2775 and then 2800 could find a lot of sellers. Overall for Monday I am not expecting a move to 2800. Instead I am anticipating some selling at the open and again later in the morning. I would also expect an early afternoon rally and then a dip mid-afternoon. The close could end up slightly lower although the technical indicators at the close on Friday do not point to any big drop or a continuation of the correction on Tuesday.
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