Thursday saw investors fret over the increasing numbers of coronavirus cases mixed with worries over large tech companies and the potential for breakups. Both issues were basically being used as excuses to take some profits, as the index has been stuck sideways since Tuesday, unable to push higher. The drop by the close of trading on Thursday, took the S&P back to just above the lows of Monday. The S&P ended down 40 points to close at 3,235. Tech stocks were hit harder and the NASDAQ ended the day at 10,461 a drop of 244 points.
Stock Market Outlook Chart Comments At The Close on Thu Jul 23 2020
The index closed above the 21 day moving average again on Thursday and above 3200 but closed below the Upper Bollinger Band leaving behind a bearish candlestick for Friday.
The Lower Bollinger Band is still moving lower. The Bollinger Bands Squeeze is over.
There are now 6 up signals and no down signals in the chart.
The 50 day moving average is climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market.
Stock Market Outlook review of Thu Jul 23 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday July 8. That up signal was weaker on Thursday.
- 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 in place and is 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 sharply.
- 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.
- 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:
3275 is resistance
3200 is still 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%.
2500 was good support and marked a correction of 26.3%
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a 41% correction from the all-time high. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Fri Jul 24 2020
For Fri Jul 24 2020, the index was fairly heavily sold in the afternoon but it failed to break the 3225 level and closed above it. On Friday we could see a bounce early morning but then more selling and a probable test of 3215 or 3210. It should be a choppy day with a number of bounce attempts but overall the technical indicators have turned primarily lower indicating that Friday will end lower. That said, any “good news” on the coronavirus should be enough to boost stocks. The market continues to swing based on the “good news” versus “bad news” scenario with Covid-19. Friday won’t see any change in scenario so without some “good news” the index will end the day lower.
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