My outlook for the day on Thursday was certainly wrong. I had expected some selling in the morning after Wednesday’s late afternoon massive rally, but then a move higher into the close. Instead investors returned to selling many of the big tech names lower and sent the S&P down 29 points and the NASDAQ 385 points lower. The selling was particularly brutal on the NASDAQ which wiped out Wednesday’s gain of 328 points. For the week, the NASDAQ is down 450 points but the S&P is down just 32 points. Selling was steady throughout the day after a brief spike at the open. The close though was bullish with the S&P managing to recover back to the 4670 level which continues to hold the rally.
Let’s review the technical indicators at the close on Thu Dec 16 2021 to see what to expect for Friday.
Stock Market Outlook Chart Comments At The Close on Thu Dec 16 2021
The closing candlestick on Thursday is bearish but also signaling oversold. The index slipped down to the 21 day moving average late in the day on Wednesday but stayed above it, a good sign for a potential bounce on Friday.
This candlestick is often followed by a failed bounce attempt which should make Friday interesting to watch. The index closed above all major moving averages including the 21 day, which is still bullish.
All the major moving averages are climbing and the Lower Bollinger Band is falling toward the 100 day which is bullish.
For Friday the closing candlestick is the primary bearish concern.
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 confirmed up signal on Wed Dec 15 2021 . The signal was still strong at the close 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 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 for tomorrow.
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.
- 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:
4725 is resistance
4700 is resistance
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Fri Dec 17 2021
For Friday, the technical indicators have reversed and are pointing lower to end the week. Only the MACD indicator continues to hold an up signal in place.
Normally, when all the indicators are pointing lower, a bounce can be expected and indeed Friday does appear ready to bounce in the morning. However the closing candlestick is typical of bounce day’s that fail. That means we could see a lower day on Friday by the end of trading.
The bounce on Friday then is suspect, especially if there is a strong bounce on the NASDAQ. Stay cautious and don’t chase trades. Instead let trades come to you on Friday.
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