Stock Market Outlook for Feb 7 2020 – Choppy Bias Lower

On Thursday the rally slowed but still turned in a decent performance, reaching new all-time highs in the indexes.

On Friday we get the January non-farm payroll numbers. That could move the markets up or down.

Stock Market Outlook Chart Comments At The Close on Thu Feb 6 2020 

The SPX chart is no longer bearish as the index is pushing the Upper Bollinger Band. The closing candlestick on Thursday is a reversal which means we should see some weakness and dips.

All the major moving averages are back climbing higher.

There are 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.

Stock Market Outlook review of Thu Feb 6 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is positive and rising.

• 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 Jan 24. At the close on Thursday the sell signal was almost gone. We could see a buy signal on Friday from MACD.

• 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 an up signal in place for Thursday.

• 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 rising and 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 rising.

• 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:

3325 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 7 2020 

For Friday we should see a weaker opening and then a rally attempt. It should be a choppy day on Friday and we could also see the VIX Index climb slightly. A lot will depend on the January jobs numbers.

A slightly negative close is a distinct possibility but even if there is one, the rally is not over. Once the weekend is over we should see the rally attempt to push still higher next week. I am expecting strong job growth for January which should move the rally still higher.

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