Stock Market Outlook for Fri Jan 12 2018 – Overbought But Still Up

Stock Market Outlook Overbought Bias Up

What Happened On Thursday Jan 11 2018

Markets on Thursday rose to all new highs for yet another day as investors focused on oil prices and upcoming bank earnings which start on Friday. Investors are convinced that record earnings lie ahead and this quarter will propel stocks still higher. By the close, with Brent Crude prices over $70, the highest level since 2014 investors and analysts are sure strong economic growth lies ahead.

The Dow rose just over 200 points. the S&P over 19 and the NASDAQ added 58 more points. Comments from New York Fed Dudley warning of an overheated economy and rising inflation, slowed buying for a brief period but the demand for stocks is high and prices rose for one of the strongest days still for the indexes.


Closing Statistics for Thu Jan 11 2018

S&P 500 Index Close

The S&P index ended up 19.33 to 2767.56

Dow Jones Index Close

The Dow Jones ended up 205.60 to 25,574.73

NASDAQ Index Close

The NASDAQ closed up 58.21 to 7211.78






Stock Market Outlook – Review of Thu Jan 11 2018

Chart Comments At The Close:

Thursday saw the index close at the Upper Bollinger Band leaving behind a bullish candlestick. All the major moving averages are climbing higher and the 50 day is moving higher above the Lower Bollinger Band. At this stage of the rally, the indicators are definitely bullish.

Stock Market Outlook review of Thu Jan 11 2018

Stock Market Outlook: Technical Indicators:

Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and roared higher reaching the strongest positive reading in over 3 months.

MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on Jan 4. The buy signal is gaining strength for Friday.

Ultimate Oscillator: 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. The Ultimate Oscillator signal is positive, overbought and still climbing.

Slow Stochastic: 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. The Slow Stochastic is extremely overbought and stayed with a down signal for Friday.

Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor.  It often is the first indicator to show an overbought or oversold signal.  The RSI signal is overbought and rising.

Rate of Change: 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.  The rate of change signal is positive and back rising.


Support Levels To Be Aware Of:

2675 and 2620 are light support.

There is good support at the 2550 level.

The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be almost 15%.


 Stock Market Outlook for Tomorrow – Fri Jan 12 2018

Technical indicators are very positive for Friday. They are also very overbought. Nonetheless the market still has room to climb although we shouldn’t be surprised if we get some sideways action. A lot of Friday depends on bank earnings which are released before markets open. Any better than expected earnings and/or revenue numbers will send stocks soaring higher. Any misses and stocks could dip at the outset, but the outlook even if banks miss on Friday, is higher by the end of the day.


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