Stock Market Outlook for Fri Aug 27 2021 – All About The Fed

On Thu Aug 26 2021 markets came under pressure from the news of bombings in Kabul and on concerns about Fed Chair Powell’s comments on Friday.

All indexes closed lower with the S&P giving back 26 points or just a little more than half a percent to close at 4470.

Let’s review Thursday’s close to see what technical changes occurred and what investors should expect for Friday.

Stock Market Outlook Chart Comments At The Close on Thu Aug 26 2021 

The most important signal in the chart is still the Bollinger Bands Squeeze. The index ended below the Upper Bollinger Band but above the 21 day moving average. You can see in the squeeze that Thursday’s candlestick is bearish for Thursday.

The Lower Bollinger Band is just below the 50 day moving average. All the major moving averages are still climbing which is bullish. For Friday the SPX chart remains bullish with only the closing candlestick advising we could see a negative close on Friday.

Stock Market Outlook review of Thu Aug 26 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and positive.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday Aug 18. On Wednesday the down signal returned.

• 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 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 has a neutral signal in place and is back to being 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 falling which indicates we should smaller swings in prices on Friday.

• 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:

4500 is resistance

4490 is resistance

4475 is resistance

4450 is light support

4400 is good support

4370 is good support

4350 is light support

4300 is light support

4290 is light support

4270 is light support

4250 is good support

4225 is light support

4200 is good support

4175 is light support

4150 is light support

4100 is good support

4070 is light support

4050 is light support

4000 is good support

3900 is support

3850 is support

3800 is support

3750 is good support

3700 is light support

3680 is light support

3600 is strong support

 Stock Market Outlook for Tomorrow – Fri Aug 27 2021 

The SPX is sitting at the 4470 level which is just below the 4475 support level. We could see a bounce on Friday, especially in the morning and at or near the open.

The technical indicators are more mixed as some point lower, others higher and still others neutral.

But most of the day will be dictated by the Fed as Powell makes his speech from Jackson Hole on Friday.

Any hint that the flood of liquidity will be drawn away this fall will sink stocks. Any “status quo” in the speech for the year will keep stocks elevated and higher by the close.

For Friday watch for a sideways day with a bias still to the upside. A dip down to 4450 would not be strange, but a bounce back up from any such dip would also not be strange. Stocks should be slightly higher by the close of trading on Friday.

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