Thursday was a dramatic day with markets open at new lows which brought in fresh buying. By the noon hour the SPX was hold the 4180 valuation. An afternoon rally saw volume climb and the end of the day saw the S&P turn positive and close up 63 points for a 1.5% gain to close at 4288.70.
The NASDAQ had an impressive day as the index opened at a new correction low of 12,587. This was followed by strong buying which sent the index up and a 3.3% higher close. The index rose 436 points intraday.
It was a dramatic day for stocks and the indexes.
Let’s review Thursday’s close to see what Friday’s trading will look like.
Stock Market Outlook Chart Comments At The Close on Thu Feb 24 2022
The S&P chart is definitely ugly but you can see the long green candlestick that defined the movement on Thursday in the S&P. The index closed above the Lower Bollinger Band but over 100 points below the important 200 day moving average.
The Upper Bollinger Band continues to rise but the Lower Bollinger Band turned sideways on Thursday as the index had a strong rebound day.
The 21 day moving average is starting to turn back up following Thursday’s large intraday gain. There are still signs the 50 day moving average will fall below the 200 day moving average which will be a third strong down signal.
As well the 50 day is falling rapidly toward the 100 day and may cross it early next week for a fourth down signal.
All the moving averages, including the 200 day are now either moving lower or turning lower. None are signaling up.
The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is hanging on which is bullish.
The chart has two down signals in place and the likelihood of two more coming shortly. One as soon as Friday.
The chart is very bearish, although the closing candlestick provides the first signal that advises the index may try to bounce on Friday after an early morning dip.
The SPX chart is very bearish and investors should stay cautious but there are signs on Thursday that the S&P may not break below 4100 unless there are further significant changes in the Ukraine-Russia conflict. Any expansion of the fighting by Putin to other countries such as the Baltic states will see the index tumble.
Stock Market Outlook review of Thu Feb 24 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and unchanged. It is at levels where a bounce can be expected.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a confirmed down signal on Thursday Feb 17 2022 last week. On Thu Feb 24 2022 the down signal was stronger but the MACD histogram is signaling a bounce is in the works.
- 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 but is turning back up.
- 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 is oversold. A bounce higher is expected.
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 rising from being oversold.
- 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 rising advising more wider price action is expected 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 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
4150 is light support
4000 is good support
Stock Market Outlook for Tomorrow – Fri Feb 25 2022
For Friday the index is set to tumble at the open but not very deeply. It will take a further escalation of events to break the market lower over the next week. On Thursday, the heavy buying ended the chance of the index falling below 4000. On Thursday I am not expecting the index to fall below 4200.
This means on Friday, a morning dip will be used to setup more trades and I will be buying SPY ETF call options on deep dips should they occur Friday morning.
The close may end up negative but there is a better chance the close will be positive on Friday, even if only by a few points as the bias has changed to up for the end of the week.
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