Thursday saw the index climbing higher until by 10:20 the index was above 3820. From there the SPX began to fall. By the end of the day, the index had given up all the gains and closed down 14 points. It was a disappointing end to a potential rally and it brought about a number of technical changes.
Stock Market Outlook Chart Comments At The Close on Thu Jan 14 2021
On Thursday the index closed below the Upper Bollinger Band and at the low of the day. This left behind a neutral candlestick for Friday.
While the Upper Bollinger Band is continuing to rise, the Lower Bollinger Band is starting to turn back up and looks set to move back above the 50 day moving average. This is bearish should it occur.
The major moving averages are still rising and the up signal from Oct 21 is still in play. The chart is still bullish but there are some bearish signals, as described above.
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 an up signal on Dec 7. On Thursday the up signal fell further and could turn to a down signal shortly.
- 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 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 and is still 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 trending higher which indicates there will be further changes in prices 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:
3800 is resistance
3750 is resistance
3700 is light support
3600 is strong support
3550 is support
3500 is strong support
3450 is support
3400 is support
3375 is support
3300 is strong support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is strong support
Stock Market Outlook for Tomorrow – Fri Jan 15 2021
For Friday, normally we should expect a bounce off the index closing at the low of the day. But at present any bounce will probably be weak. The market did not react positively to news of a $1.9 trillion stimulus package announced on Thursday and that was a surprise. Investors might be doubting the chance of the package being passed. The technical signals have shifted back to lower and the Rate Of Change is rising which often signals that we could expect a wider move which may mean prices could fall further on Friday.
The outlook is still sideways but technically the indicators are advising to stay cautious and expect a lower close and choppy trading on Friday.