On Thursday fears of the coronavirus came back once again to haunt investors and stocks sold off as a result. A major swoon around 11:30 saw the index at its worst level of the day slipping just below 3345 but still above the 21 day moving average. The index recovered to close down just 13 points to 3373 after a low of 3341 mid-morning.
Stock Market Outlook Chart Comments At The Close on Thu Feb 20 2020
The SPX chart is still bullish but the closing candlestick on Thursday is bearish for Friday. The dip on Thursday failed to reach the 21 day moving average but another dip on Friday is expected and could touch the 21 day moving average. That would spark an intraday bounce.
All the major moving averages are climbing and the 100 day is continuing to approach the 3200 support level and the 200 day is still moving to the 3100 support level. A move above those support levels will be another indication of further upside for the S&P for the remainder of February and into the start of March.
There are still four support levels in place. These are light support at 3200, 3100 which is a full 100 points lower, 3075 which is light support and 3000 which is major support.
The next major dip in the index may try to find support around 3300. If that level was tested and held, it would signal a major move higher is still to come for the S&P.
Resistance to the rally is at 3400.
Stock Market Outlook review of Thu Feb 20 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive but falling for a third day indicating growing weakness.
- 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 Feb 7. The up signal was weaker again on Thursday which is pointing to further weakness tomorrow.
- 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 dipping slightly.
- 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 for Friday and remains very 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.
- 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 moving sideways.
- 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:
3400 is resistance
3200 is light support
3100 is light support
3075 is light support
3030 is very light support
3000 is good support and if the S&P fell this low it would mark a normal correction in a bull market
2960 is light support
2900 is light support
2860 is light support
2840 is good support
2800 is strong support
Stock Market Outlook for Tomorrow – Fri Feb 21 2020
For Friday there are once again no actual up signal aside from the positive reading from MACD.
All the signals are moving lower or falling.
With the weakness on Thursday, the signals have turned weaker.
A lower day is expected for Friday by the close.
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