Thursday was another large down day for stocks. With no resolution on the Ukraine-Russia crisis and the possibility of war rising, investors spent the day selling the market lower.
It was the worst day for the Dow Index for 2022 as it lost 622 points for a 1.78% drop. The NASDAQ fell 407 points for a 2.9% drop and a move back below 14,000 at 13,716. It now down 15% from its high.
The S&P fell 95 points for a 2.1% drop, ending the day at 4380.26. Stocks closed near the day’s low.
There was no respite from the selling. It remained steady all day but with no panic. It was a day to “unload” equities.
Let’s review Thursday’s close to learn what investors should expect for Fri Feb 18 2022, the last day of the third week of February.
Stock Market Outlook Chart Comments At The Close on Thu Feb 17 2022
The closing candlestick on Thursday is bearish. The candlestick closed below the 200 day moving average. This candlestick often sees a bounce to start the following day and then a move still lower.
The Upper Bollinger Band is ready to cross below the 50 day moving average which will be another sell signal. The Lower Bollinger Band is starting to turn back lower, which is also bearish.
The 21 day moving average is back falling which is bearish.
The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is rising which is bullish.
The chart has two down signals in place and the index could generate a third down signal on Friday if the Upper Bollinger Band moves below the 50 day moving average. The chart is very bearish and the Bollinger Bands Squeeze won’t occur now until next week. It still looks set to send the index below the lows from late January, down to the 4200 level. That’s a guess which is not backed by any technical indicator at present.
The SPX chart is very bearish.
Stock Market Outlook review of Thu Feb 17 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged and negative.
- 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. On Thu Feb 17 2022 a new unconfirmed down signal was generated. The MACD histogram has turned negative.
- 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 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 has a down signal in place.
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 and now down to oversold readings.
- 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:
4800 is resistance
4725 is resistance
4700 is resistance
4670 is resistance
4655 is resistance
4600 is resistance
4550 is resistance
4525 is resistance
4500 is resistance
4490 is light resistance
4475 is light resistance
4450 is light 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 18 2022
For Friday the index remains bearish but with a chance to see a bounce to start the day. Once the bounce is finished, the index will move lower. A more sustained bounce will happen, should Russia pullback from Ukraine which seems unlikely at present.
Any negative news on the Ukraine-Russia crisis will see stocks move lower quickly. An invasion by Russia will see stocks tumble probably to 4200 or 4150 within a day or two at most.
A new unconfirmed MACD sell signal is in place and the technical indicators have turned negative. The best that can be said is that the Relative Strength Index (RSI) indicator is at oversold readings which often see a bounce. While analysts keep expressing their opinions that the selling is overdone, this is not deterring investors who are continuing to unload equities. The profits being made by the SPY ETF hedge strategy each day are at levels that are seen in bear markets, not a bull market in correction. There is a strong possibility of the SPX falling back to the Jan 24 intraday low of 4222
Stay cautious on Friday and if trading the expected bounce, take profits. Keep raising capital to assist for when the next rally comes. That may not happen for awhile until there is more clarity on the Ukraine-Russia crisis. Any hint of a resolution and the market will rally strongly higher.
On Thursday I bought SPY put options in the morning, as outlined yesterday in the Market Direction Portfolio. Near the close on Thursday I sold 40% of the SPY put contracts. On Friday if there is no resolution on the crisis, I will buy more SPY Put options on any rally, basically replacing the SPY put options I sold on Thursday.
Don’t forget the President’s Day Weekend Membership Sale starts Saturday. For interested investors this is a chance to get a membership at a discount price, to assist navigating what looks like a rough 2022. I hope you’ll take advantage and join or renew your existing membership.
Stock Market Outlook Archives
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
Morning Investing Strategy Notes for Tue Apr 23 2024
Stock Market Outlook for Tue Apr 23 2024 – Bounce But Lower
Morning Investing Strategy Notes for Mon Apr 22 2024
Stock Market Outlook for Mon Apr 22 2024 – No Change – Deeply Oversold Bounce Possible
Morning Investing Strategy Notes for Fri Apr 19 2024
Stock Market Outlook for Fri Apr 19 2024 – Deeply Oversold – Bounce Likely – Higher Close
Morning Investing Strategy Notes for Thu Apr 18 2024
Stock Market Outlook for Thu Apr 18 2024 – Deeply Oversold – Bounce Attempt Expected
Morning Investing Strategy Notes for Wed Apr 17 2024
Stock Market Outlook for Wed Apr 17 2024 – Another Bounce Attempt
