On Thursday investors had to “digest” the Fed minutes from Wednesday. In the end the S&P and NASDAQ closed slightly higher but trading action in the dips showed ready buying. Volumes on the day though were poor which could lead to more dips again on Friday before the SPX closes higher.
The SPX ended the day up 9 points to close at 4283. It come within 8 points of 4300 intraday.
The NASDAQ ended higher by 27 points to 12,965. The index is now just 35 points from breaking 13,000.
Let’s review the closing technical indicators from Thursday to see what to expect for Fri Aug 19 2022.
Stock Market Outlook Chart Comments At The Close on Thu Aug 18 2022
The closing candlestick is bullish for Friday but the shadows on the candlestick indicate dips are likely once again. The candlestick is above the 200 day moving average for a seventh day. This is bullish.
The 21 day moving average is still rising and moved above the 100 day moving average on Wed for a second major up signal. It could move above the 200 day by Monday. This would be a major up signal for the index.
The first up signal since April was released Tuesday Aug 2 when the 21 day moving average crossed above the 50 day moving average.
The Upper Bollinger Band is rising and continued to move above the 200 day moving average which is bullish.
The Lower Bollinger Band is climbing higher again which is bullish. There are some signs by the close on Thursday that this move higher by the Lower Bollinger Band may end up in a Bollinger Bands Squeeze. That would be bearish with a good chance stocks will dip. I will be watching for this signal.
The 200 and 100 day moving average are now trending sideways which is neutral.
There are now 2 down signals still in place and two up signals.
The chart is 85% bullish for Friday. Watch for dips again on Friday and a chance to setup further trades.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday June 27. On Thursday the up signal lost strength. The histogram weakened. Both are still bullish but the signal is a lot weaker.
- 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 is rising and into overbought 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 and is extremely 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 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 falling.
- 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:
4350 is strong resistance
4325 is strong resistance
4300 is strong resistance
4290 is light resistance
4275 is light resistance
4265 is light resistance
4250 is stronger resistance
4220 is light support
4200 is light support
4150 is light support
4100 is light support
4050 is light support
4025 is light support
4000 is light support
3975 is light support and is a decline of 17.5%
Stock Market Outlook for Tomorrow – Fri Aug 19 2022
For Friday the technical indicators are still mixed. Of most concern is the MACD indicator which is rapidly loosing the up signal. Friday needs to be higher to help slow the decline in this signal.
With signals split between up and down, the bias is more to the downside from the technical indicators but stronger to the bullish side in the SPX chart.
This means on Friday there will be dips but the chart is advising that the market despite being overbought, has a good chance it will still close higher.
Potential Market Moving Events
On Thursday we saw the Weekly Initial Unemployment Insurance Claims come in strong at 250,000. Continuing jobless claims were unchanged at 1.44 million. The manufacturing index rose to 6.2, well beyond the negative 5 expected by economists. All of these numbers indicate the economy is doing well. They also indicate the Fed will continue to raise rates.
Also of interest, existing home sales came in as expected at 4.81 million, down from 5.11 million from the prior month. This is about the only sign of weakness in the economy at present that favors the bullish outlook.
There are no signals of concern for the market.