Stock Market Outlook for Fri Jan 8 2021 – Unconfirmed MACD Up Signal

Thu Jan 7 2021 saw stock indexes recover the earlier moves from Wednesday morning. The S&P rose 55 points closing at another new all-time high of 3803. Intraday the index reached 3811.55.

The Dow closed above 31,000 for the first time in its history and the NASDAQ reached 13090 intraday and closed at 13067, above 13,000 for the first time in its history.

Thursday then was a day of records. Let’s review the closing technical indicators to see what they are predicting for Friday’s trading activity.

Stock Market Outlook Chart Comments At The Close on Thu Jan 7 2021

On Thursday the index closed above the Upper Bollinger Band and left behind a bullish candlestick for Friday.

The Bollinger Bands Squeeze continues to be in play and signs on Thursday show the Upper Bollinger Band is rising and the Lower Bollinger Band is falling which could signal the Bollinger Bands Squeeze is ending shortly with the index pushing higher.

The major moving averages are still rising. The up signal from Oct 21 is still in play.

Stock Market Outlook review of Thu Jan 7 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and positive.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Dec 10. On Thursday the day ended with an unconfirmed up signal, the first since Dec 10.

• 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.

• 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 an up 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 rising.

• 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.

• 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 8 2021 

For Friday the technical indicators are pointing to a higher day for Friday. Since the pandemic collapse though, when all the technical indicators turn bullish, the SPX has had a hard time rising so that’s important to keep in mind as Thursday’s close saw all the indicators bullish, once again.

Meanwhile the S&P has pushed into more resistance but as many investors who have stayed away from this market are now rushing to get back in, volumes are showing some peak levels, particularly on the NASDAQ index. These are some of the highest volume days of the past couple of years for the NASDAQ. While by itself these do not necessarily point to a blow-off coming soon, it is something to watch and remain cautious around.

For Friday the S&P is again positioned to move higher and dips in the index are still opportunities to setup trades.

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