Stock Market Outlook for Fri Jul 10 2020 – Weakness And Back To Lower

Stock Market Outlook Weakness and Lower

On Thu Jul 9 2020 stocks started the day with a slight bump to above 3175 on better than expected Weekly Initial Unemployment Insurance Claims but the bump was short-lived. By 11:00 AM the index was below 3120 which was below the low of July 2 and setup the index for a new short-term low. That though brought in buyers who pushed back and managed to close the S&P at 3152. The 3150 level is support but is being tested frequently since July 2. Let’s review Thursday’s close to see what it can predict for Friday.

Stock Market Outlook Chart Comments At The Close on Thursday July 9 2020

The index closed above the 21 day moving average again on Wednesday but it reached it in the morning drop to below 3120. That resulted in a technical bounce off the 21 day moving average but is left behind a bearish candlestick for Fri Jul 10 2020.

As well, looking at the chart you can see that the Upper Bollinger Band is turning lower signaling a good chance the index will fall back rather than original prediction of a climb higher.

There are now 6 up signals and no down signals in the chart.

The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market.  The market still has to retake the 3200 level and push higher to confirm whether this is a rally to a new high or just another rally in a sideways market stuck in a trading range.  Note as well the 21 day moving average is dipping lower, which needs to be watched. The chart is definitely showing signs of weakness as the index is unable to climb above the 3200 level, let along hold onto the 3150. That means usually the index has to move down to find support.

Stock Market Outlook review of Thu Jul 9 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising again.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday June 12. On Wednesday the signal was an unconfirmed up signal and on Thursday the up signal was still not confirmed.

  • 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 back 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 a down signal in place and is once again very 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 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 and still negative which indicates lower prices are ahead.

  • 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:

3200 is resistance

3150 is support

3050 is support

3000 is support

2975 is light support

2950 is light support

2900 is light support

2860 is light support

2840 is light support

2800 is good support

2725 is light support

2700 is light support and marked a drop of 20.4%.

2675 is light resistant

2650 is light support

2625 is light support

2600 is support

2550 is light support

2500 was good support and marked a correction of 26.3%

2344 is the next level of support and marks a 30.9% correction.

2191 was the market low on March 23

2100 is light support

2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts still believe the index will fall this low in the second half of 2020.

 Stock Market Outlook for Tomorrow – Fri Jul 10 2020 

Investors are once again focused on the growing number of COVID19 cases and worried that this will stall any recovery or at least much of the expected recovery.

MACD still has been unable to confirm the up signal but two technical indicators are still rising. However 3 are falling and one of those has a down signal in place (Slow Stochastic).

For Friday there will be more weakness evident. The chance the S&P closes negative is high but how low it may move is hard to determine as most investors holding positions do not want to sell out, as they expect more upside is still ahead. However on Friday we should see the index retest the 3120 level from Thursday’s morning drop. A positive end to the day is unlikely on Friday.

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