Thursday saw stocks open considerably lower but then spend most of the day climbing back higher. It seemed on Thursday that it wasn’t the horrific GDP number but instead comments from the President on possibly delaying the election. This created an unknown event which for investors is always something they hate. Stocks fell in the morning as the media focus continued to worry investors.
Stock Market Outlook Chart Comments At The Close on Thu Jul 30 2020
The index fell to the 21 day moving average on Thursday which brought in buyers who pushed back. Despite the push back, the candlestick is still bearish for Friday.
You can see in the chart that the Upper Bollinger Band has turned down and the Lower Bollinger Band has sharply risen above the 100 day. This is setting up another Bollinger Bands Squeeze that looks like the index may dip lower,
There are now 6 up signals and one down signal with the Lower Bollinger Band moving above the 100 day moving average.
The 21 and 50 day moving averages are 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 but the chart looks set to turn bearish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is moving sideways for a second day.
- 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. On Tue Jul 28 2020 MACD issued an unconfirmed down signal and on Thursday the down 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 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 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 which indicates prices are not expected to change much on Friday.
- 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 31 2020
For Friday the index looks set to try to bounce higher but the technical indicators are split as a number of the indicators are now pointing lower for Friday.
We should see a choppy session on Friday but while there is a good chance of a lower close, there is probably almost an equal chance it will rise. My bet would be on dips but a gradual recovery to a positive close.