Inflation data on Thursday failed to show inflation was peaking. At the same time, it did not show that inflation was “raging ahead” either. Still, investors at the outset of trading decided to sell on the inflation data and the open saw the index collapse to 3740 by 10:00 AM. That though ended up being the low as buyers stepped back in and by 12:30 the S&P had recovered to Wednesday’s close of 3818. The final two hours of trading saw sellers return but on lower volume. The close was lower by 33 points with the S&P at 3785.
The NASDAQ lost 149 points to close at 11,028.
With Monday the July 4th holiday, let’s review Thursday’s close to see what to expect for Friday ahead of a shortened week next week.
Stock Market Outlook Chart Comments At The Close on Thu Jun 30 2022
On Thursday the closing candlestick is bearish and points to a lower day on Friday.
The Upper Bollinger Band fell below the 200 day moving average which is another down signal for the index.
All the moving averages are falling.
The Lower Bollinger Band is still falling which is bearish.
There are no bullish signals for Friday.
There are 4 down signals still in place and there have been no up signals since the start of April.
The chart is 95% bearish for Friday. A close down at 3740 is likely.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and 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 Monday June 27. On Thursday the up signal lost strength and the MACD histogram also lost strength.
- 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.
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 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:
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is strong resistance
3975 is light resistance and is a decline of 17.5%
3900 is light resistance and is a decline of 19%
3850 is light resistance and is a decline of 20%
3825 is light support
3800 is good support.
3775 is light support
3750 is light support
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Fri Jul 1 2022
For Friday the technical indicators are all bearish. Even MACD is losing the up signal. With so many signals bearish, it would not be unusual for a bounce attempt especially as the first day of July historically has been higher 87% of the time over the past 32 years.
However the technical indicators are pointing lower for the index and the Upper Bollinger Band falling below the 200 day is quite bearish.
Friday will continue the weakness we have seen and end with a lower close, perhaps down to 3740.
Potential Market Moving Events
For the final week of June the biggest events are on Thursday when inflation reports are released. Any indication of even a slight slowing of inflation will see stocks rise. Any rise in inflation will send stocks lower.
8:30 PCE Inflation (monthly) was 0.6%
8:30 Core PCE Inflation (monthly) was 0.3% slightly below estimates of 0.4%
8:30 PCE Inflation year-over-year was 6.3% in-line with estimates
8:30 Core PCE Inflation year-over-year was 4.7% which was below estimates of 4.8%
8:30 Real disposable income was -0.1%
8:30 Real consumer spending was -0.4%
8:30 Weekly Initial Unemployment Insurance Claims was 231,000 in-line with estimates
9:45 Chicago PMI was 56.0 below estimates of 58.0
10:00 ISM manufacturing index
10:00 Construction Spending