Apple Stock was the primary culprit of the sell-off on Thursday as it fell the most in a single day in 6 years. Add in an ISM manufacturing report that missed estimates by 3 points with the lowest reading since September of 2016. The report still showed manufacturing as expanding, analysts and investors focused on the report as a sign that the economy is cooling. The fed perfectly into the outlook that earnings may be reduced in 2019 and there could possibly be a recession. All of this was behind the collapse of stocks on Thursday which saw the Dow end the day down 660 points, the S&P down 62 points and the NASDAQ down 202 points. Losses were widespread.
Here are the closing technical indicators and the outlook for Friday which promises to be another roller coaster day for investors as we get the December non-farm payroll jobs numbers and a speech from Fed Chair Jerome Powell. It should be a wild day.
Stock Market Outlook Chart Comments At The Close on Thu Jan 3 2019
The S&P chart remains bearish with 6 sell signals. The S&P ended the day at the 2450 level which has held the market up for the past 6 trading days. The closing candlestick today was bearish for Friday.
The 100 day is starting to slip lower as it moves away from the 200 day, signaling the correction will continue.
The Upper Bollinger Band is falling lower sharply indicating further downside is expected.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Mon Dec 10 2018. That down signal is extremely weak as of Thursday’s close. The market was almost set for an up signal from MACD just two days ago. That now seems unlikely.
- 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 signal is falling but not oversold.
- 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 weak sell signal on the SPX for Friday.
- 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 also falling and very oversold.
- 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 Resistance Levels To Be Aware Of:
2900 was support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong resistance
2795 is light resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is resistance
2675 is light resistance
2650 is light resistance
2620 is light resistance
2600 is strong resistance.
There was good support at the 2550 level which is now resistance.
The 2500 level is resistance.
The S&P has light support at 2480 and better support at 2450.
There is 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 of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Fri Jan 4 2019
Friday promises to be a wild day. The morning will see an initial reaction from the December jobs numbers which are expected to be good but show a slightly decline from earlier estimates.
The Fed Chair speaks publicly on Friday. In the past his comments have been confusing at times and were behind the sell-off which started at the start of October 2018.
Other worries are plaguing stocks as well including Apple Stock’ decline and concerns over the economy slowing, although there are no solid signs that is yet the case.
The outlook for Friday based on the technical indicators is for a lower close. There are no positive technical indicators for Friday, but the Rate Of Change is extremely oversold which often sees stocks bottom, and try to bounce, even if only for a short-term recovery. While that is not expected to happen on Friday, we could see the oversold signal, positively affect markets next week.
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