On Thursday stocks continued the advance but on lower volume on the S&P as many investors are not trusting the advance and expect it to pullback. As well next week we get the next interest rate hike from the Federal Reserve. Worries are continuing to keep many investors on the sidelines. The S&P rose 44 points to close at 4060.
The NASDAQ however had excellent volume with more than 6 billion shares traded. It rose 199 points to close at 11512. It is now just below the 200 day moving average.
Let’s review the closing technical indicators from the SPX on Thu Jan 26 to see what to expect for Fri Jan 27.
Stock Market Outlook Chart Comments At The Close on Thu Jan 26 2023
On Thu Jan 26 2023 the S&P traded the entire day above the 200 day moving average. This is bullish.
The closing candlestick is bullish for Friday and is signaling the index is becoming overbought.
The Upper Bollinger Band is continuing to rise which is bullish. The Lower Bollinger Band back rising which is bullish.
The 200 day moving average is falling which is bearish but all the remaining moving averages are rising. This includes the 21, 50 and 100 day moving averages. This is bullish.
The 21 day moving average has reached the 100 day. Tomorrow it should move above it for a new up signal. When this happens it will replace the Jan 4 down signal.
At present there are are 5 down signals in place since April 24 and one up signal but that should change on Friday by the close.
The chart is 55% bullish for Friday, a significant change from Thursday’s outlook.
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 Monday Jan 9. The up signal gained strength on Thursday as did the histogram.
- 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 and overbought.
- 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 strong up signal in place and is also 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 rising and overbought.
- 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 and positive.
- 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:
4050 is resistance
4030 is resistance
4025 is resistance
4000 is resistance
3975 is light support
3965 is light support
3950 is light support
3930 is light support
3900 is light support
3875 is light support
3850 is good support
3830 is good support
3810 is light support
3800 is good support
3775 is good support
3750 is good support
3730 is light support
3725 is light support
3715 is light support
3700 is good support
Stock Market Outlook for Tomorrow – Fri Jan 27 2023
The technical signals are now bullish and the majority are signaling that the rally has pushed the index into overbought readings. Intel earnings were shockingly bad and that will weigh on the semiconductor stocks Friday morning, probably at the open. However many investors are looking for any dip to jump into more positions. For that reason I think any weakness on Friday won’t last and the day would move higher.
New 52 week highs are still outpacing new lows which is a good sign for the bulls.
Potential Economic and Political Market Moving Events
There are a number of events today that could swing markets, especially the PCE price index and inflation expectations. I am not however expecting they will derail the rally on Friday.
Friday:
8:30 Real Disposable Incomes
8:30 Real Consumer Spending
8:30 PCE Price Index
8:30 Core PCE Price Index
8:30 Core PCE Price Index Year-Over-Year
10:00 University of Michigan consumer sentiment
10:00 University of Michigan 1 year inflation expectations
10:00 University of Michigan 5 year inflation expectations
10:00 Pending home sales
Stock Market Outlook Archives