On Wednesday, it had been Fed Chair Powell who sunk stocks. On Thursday it was President Trump.
Stocks had staged an impressive rally back and recovered the losses from the day before. Then news came of the President’s decision to impose another 10% tariff on Chinese goods starting September 1. That sent stocks plummeting. This time the S&P broke through the important 2950 support level and managed to push back and close just above it.
All 3 indexes were lower with the S&P down 26.82 points to 2953 for a loss of almost 1%. The loss was made worse by the fact that the index had recovered to 3013 before the news of the new tariffs hit the market. This meant the drop was 60 points from the day’s high which is bound to be felt on Friday.
Let’s review the technical indicators from Thursday’s plunge.
Stock Market Outlook Chart Comments At The Close on Thu Aug 1 2019
The SPX chart is no longer bullish.
The closing candlestick is very bearish for Friday.
The index ended the day below the Lower Bollinger Band and well below the 21 day moving average. Both of these are bearish signals.
You can clearly see the Bollinger Bands Squeeze is underway. The outlook is now negative out of the Bollinger Bands Squeeze as it ends.
Meanwhile all the major moving averages are still climbing and the 100 day is almost ready to break above 2900 which will add support to the SPX.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Thursday July 18. The down signal was strong on Thursday.
- 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 negative and falling.
- 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 signal has a down signal in place for Friday.
- 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 falling indicating lower prices are ahead for the index.
- 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:
3000 is resistance
2960 is light support
2900 is light support
2860 is better support
2830 is light support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
Stock Market Outlook for Tomorrow – Fri Aug 2 2019
The market has to work out its concerns over the next round of tariffs. That means a negative close for Friday.
If any rally spikes high enough I plan to buy Spy Put Options as outlined in the Market Breadth Indicator article from this evening.
The index will probably open lower and may try to rally early in the trading day. The rally will fail and the day will end with the indexes lower ahead of the weekend.