Stock Market Outlook for Fri Feb 19 2021 – Weakness, Bounce Still Possible But Lower Close

The Weekly Initial Unemployment Insurance Claims sent a few shock waves through the markets coupled with earnings from Walmart that seemed to disappoint a large number of analysts. That set in motion selling which saw the S&P tumble to below 3890 early morning before recovering in the afternoon. The close still saw a loss of 17 points, just shy of half a percent to close at 3913.97. The index is continuing to hold 3900.

Stock Market Outlook Chart Comments At The Close on Thu Feb 18 2021 

The S&P closed above the 21 day moving average although in the morning it came close to reaching it. The closing candlestick is bearish for Friday. The market is continuing to try to consolidate recent gains but has slipped for 3 straight day. Thursday saw the biggest closing decline of the last 3 trading days.

The Upper Bollinger Band is continuing to rise. The Lower Bollinger Band is turning back up. At present I am not concerned about the change in trend here for the Lower Bollinger Band but it needs to be watched as it may signal a bigger dip next week if it continues to rise.

The 21 day moving average is rising and is now at 3855. The 200, 100 and 50 day moving averages are still climbing with the 100 day moving average now at the 3660 valuation and the important 200 day moving average at 3490. These are strong indicators the market will continue to push to new highs.

Stock Market Outlook review of Thu Feb 18 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is moving sideways and is positive.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Feb 5 2021. On Thursday the up signal was cut in half.

• 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 rising.

• 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 and is still very 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.

• 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:

4000 is resistance

3900 is resistance

3850 is support. The 21 day moving average is presenting here.

3800 is support.

3750 is support

3700 is light support

3600 is strong support

3550 is support

3500 is strong support

3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.

 Stock Market Outlook for Tomorrow – Fri Feb 19 2021 

The technical indicators are pointing to another day of weakness on Friday.

The past three days of weakness are turning the MACD lower and it is nearing a down signal.

For Friday the indicators are showing a chance for a bounce but weakness to end the day looks likely as investors wait for the stimulus bill to gain further traction.

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