On Monday continuing concerns over the financial impact of the coronavirus to global economies sent investors into a selling frenzy. All three indexes saw their worst single day of declines in years. The S&P lost 3.35%,the Dow Jones 3.56% and the NASDAQ lost 3.7%. Indexes tried to stage a rebound in the afternoon but sellers took advantage and pressured buyers who quickly moved aside.
Stock Market Outlook Chart Comments At The Close on Mon Feb 24 2020
The SPX chart is bearish following three days of selling with a potential washout day on Monday. The closing candlestick points to a potential bounce for Tuesday morning.
The index dropped through the 21 day and 50 day on Monday closing at 3226 about 6 points above the day’s low of 3259.81.
The 21 day moving average is now falling but the 50, 100 and 200 day moving averages are still climbing.
The 3300 light support level was easily broken on Monday but normally a support level is revisited which we might see an attempt to recover perhaps as much as 40 to 55 points of Monday’s loss on Tuesday.
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.
Resistance to the rally is still at 3400.
Stock Market Outlook review of Feb 24 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling for a fifth day.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Feb 21. The down signal was confirmed today.
- 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 falling and nearing oversold readings.
- 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 Tuesday and is no longer 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 rapidly and now into oversold readings that usually are followed by a bounce.
- 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 also falling and it too is into oversold readings that normally are followed by a bounce.
- 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 – Tue Feb 25 2020
For Tuesday the plunge on Monday has setup the day, or at least the morning, for a rally attempt.
We should see a bounce in the morning either from the open or early morning if the index opens lower.
A rally regaining 50% of what was lost on Monday would not be unusual. However a plunge as big as we saw on Monday, normally is revisited or partly revisited before it ends. Therefore on Tuesday I will be taking some profits from Monday’s trades. The close of the day should be higher on Tuesday but has a good chance of seeing further selling on Wednesday unless there are positive developments on the spread of the coronavirus outbreak.
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