Thursday saw three bounce attempts intraday and an early morning plunge down to 4671 which quickly found buyers. The high for the day reached 4725. The close saw a drop back to a negative close with a loss of just 4 points to end the day at 4696, or basically back to light support at the 4700 valuation.
The NASDAQ had a similar day with a drop to 14915 and a rally to 15198. The close saw a small loss of 19 points and a close at 15080.
Friday we get the December unemployment report which many analysts believe will show strong job gains and support the Fed’s plan to pull liquidity out of the markets to reduce their balance sheet and prepare for an interest rate hike as early as March. General estimates have job growth rising to 422,000 in December, double November’s 210,000. They believe the unemployment rate will fall to 4.1%.
While the December jobs numbers will be important on Friday, the technical indicators from Thursday are also worth reviewing.
Stock Market Outlook Chart Comments At The Close on Thu Jan 6 2022
There are several changes in the chart and in the technical indicators investors should be aware of.
The close on Thursday was below the 21 day moving average. Intraday the index reached the 50 day before rebounding. This is bearish.
The closing candlestick on Thursday is neutral, which is to be expected ahead of the December unemployment report.
The Upper Bollinger Band is turning lower which is bearish. The Lower Bollinger Band has turned back up and moved above the 100 day moving average. This is now bearish.
Meanwhile the 21 day moving average is turning sideways which is bearish.
The 50, 100 and 200 day moving averages are still climbing, all of which is bullish.
For Fri Jan 7 2022 the index is more bearish than bullish. The 50 day is holding the 4700 level and a correction here would easily break down to the 100 day moving average.
Stock Market Outlook review of Thu Jan 6 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling sharply and turned negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Thursday Dec 23. On Thursday the up signal was lost. A new unconfirmed down signal emerged.
- 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 unchanged and near 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 down signal in place.
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 unchanged and near oversold readings.
- 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 falling.
- 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:
4800 is resistance
4725 is resistance
4700 is support
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Fri Jan 7 2022
For Friday, the jobs numbers may support the index during the start of the day but overall the indicators are pointing to a lower day by the close. Technical indicators have shifted to a more negative stance and with an unconfirmed down signal from MACD in place as of Thursday’s close, investors should stay cautious as a move lower is more likely than a rally back to the 52 week high.
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