The inflation numbers were higher than expected coming in at 7.5% annual for January versus 7% in December. Core inflation came in at 6% up 0.6% since December’s numbers. The four largest inflation culprits were driven higher by gasoline, electricity, food and housing. The inflation numbers though, weren’t the catalyst for the sell-off. Instead it was comments from St Louis Fed President Bullard that sunk stocks. Bullard indicated his view that he would like to see rates as high as 1% by July and at least one rate increase of half a percent. That shot 10 year Treasury yields above 2% and stocks tumbled.
SPX Intraday Chart – 5 Minutes
Stocks opened lower and quickly fell to 4530 which saw a rally back to 4589. From there the market drifted below Wednesday’s close but selling pressure was normal until as the lunch hour drew to a close and Bullard’s comments were reported. Bloomberg reported it with the heading “Fed’s James Bullard Wants a Supersized Rate Hike.” That stunned investors and selling erupted. Selling picked up around 1:20 when Treasury yields broke above 2% but also when rumors circulated that the first rate hike could be as high as 1%. This was nonsense but investors are always nervous and sell orders picked up. Stocks fell throughout the afternoon breaking through 4500 late in the day before a small rebound into the close left the index back above 4500 but by just 4 points.
SPX Intraday Thu Feb 10 2022
The day ended with the S&P down 83 points to close at 4504. It is now up just 3 points on the week.
The NASDAQ fell 305 points wiping out Wednesday’s massive rally. For the week the index is still up 87 points.
Let’s review Thursday’s closing numbers to learn what investors should expect for Friday Feb 11 2022.
Stock Market Outlook Chart Comments At The Close on Thu Feb 10 2022
The closing candlestick on Thursday is bearish for Friday. The candlestick traded in-between the 100 and the fallen 21 day moving average and closed at the 21 day. This is negative but often there will be a bounce attempt before falling back below the 21 day on Friday.
The 21 day moving average is turning sideways which is bullish.
The Upper Bollinger Band is still falling sharply which is quite bearish and you can see the Lower Bollinger Band is starting to rise. This is moving toward a Bollinger Bands Squeeze for next week which at present is taken as a bearish signal that the index may retest the 4400 level .
The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is back rising which is bullish.
The chart has two down signals but there is a chance the 50 day may not reach and fall below the 100 day moving average. This would be a bullish signal should it occur. For Friday, the sell-off on Thursday has turned the chart more bearish. The chance of a Bollinger Bands Squeeze is of particular concern for next week.
Stock Market Outlook review of Thu Feb 10 2022
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 Friday Feb 4. The up signal on Thursday was 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 positive and rising which is bullish.
- 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 and room to move higher before reaching overbought signals. This is bullish.
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 sharply. This is bearish.
- 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 is bearish.
- 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:
4800 is resistance
4725 is resistance
4700 is resistance
4670 is resistance
4655 is resistance
4600 is resistance
4550 is light support
4525 is light support
4500 is good support
4490 is light support
4475 is light support
4450 is medium support
4400 is good support and the 200 day moving average
4370 is light support
4350 is light support
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
Stock Market Outlook for Tomorrow – Fri Feb 11 2022
Following comments by Bullard, investors are back focused on the Fed raising interest rates more than a quarter of a percent. Within minutes of Bullard’s comments being reported by Bloomberg, surveys showed a shift to the majority of analysts believing the Fed will hike a half percent in March and possibly another half a percentage in April.
The turmoil caused by Thursday’s decline will see a lower day on Friday. There is a potential for a bounce higher, but it will not hold. Investors will now use any bounce as a chance to sell out of positions they just bought earlier this week. Friday will end lower as the outlook turns back to negative for now.
On Friday my SPY market direction trades will be biased to the put side. If there is a rally I will be buying put options when the rally turns sideways intraday.
Stock Market Outlook Archives
Stock Market Outlook for Fri May 3 2024 – All About The April Non-Farm Payroll Report
Morning Investing Strategy Notes for Thu May 2 2024
Stock Market Outlook for Thu May 2 2024 – Potential Bounce But Lower
Morning Investing Strategy Notes for Wed May 1 2024
Stock Market Outlook for Wed May 1 2024 – Bounce But Lower – Fed Interest Rate Decision
Morning Investing Strategy Notes for Tue Apr 30 2024
Stock Market Outlook for Tue Apr 30 2024 – Dips Likely – Flat To Higher Close
Morning Investing Strategy Notes for Mon Apr 29 2024
Stock Market Outlook for Mon Apr 29 2024 – Some Weakness But Higher
Morning Investing Strategy Notes for Fri Apr 26 2024
Stock Market Outlook for Fri Apr 26 2024 – Higher and Positive Close
Morning Investing Strategy Notes for Thu Apr 25 2024
Stock Market Outlook for Thu Apr 25 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 24 2024
Stock Market Outlook for Wed Apr 24 2024 – Some Weakness But Higher Close
