The outlook for Thursday was for another day of weakness and slightly lower close. We got both, particularly in the last few minutes of the day when large investors were making month end adjustments which spiked volume and dropped the S&P several additional points. Overall though it was a sideways day that kept a bias lower.
For the month of February the S&P added 80.39 points for a monthly gain of 3.21%. Since the start of 2019 the index is up a very impressive 11.08% in 2 months.
The NASDAQ added 250.79 points for February, rising 3.78%. For the year to date the index is up a stunning 13.52%.
Now the question is, can the indexes build on those gains for the remainder of the year? This could be quite challenging.
Stock Market Outlook Chart Comments At The Close on Thu Feb 28 2019
Again, not a lot of changes on Thursday in the index but there are some subtle changes forming up. Looking at the chart you can see that the 100 day is still just below the 200 day moving average. The 50 day is still a long way below the 100 and 200 day moving averages. The closing candlestick is bearish for a 4th day and the index is slipping toward the 21 day moving average as it falls away from the Upper Bollinger Band.
Meanwhile the Upper Bollinger Band is falling and the Lower Bollinger Band is rising in what could be a Bollinger Bands Squeeze for mid-week, next week. This could send stocks higher or lower, but if the squeeze occurs there will be a change in direction.
There are still 3 up signals in place and 6 down signals. The down signals will begin to be dropped as the moving averages recover to their correct positions with the 21 day on top and the 50 day leading the 100 and 200 day moving averages. The 100 day moving average is trading below the 200 day and could cross above it at any time. This would be a major up signal if it occurs.
The 2600 level has anchored the rally since January 14. The 2700 level has been held for the entire month of February. Both of these are bullish signs.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive but continuing to fall.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Jan 4 2019. Today at the close MACD issued an unconfirmed down signal. We will need another day or possibly two, to confirm the signal.
- 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 signal 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 stronger down signal in place for Friday which you can see from the spread between the two signals. It is also 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 quickly and no longer overbought.
- 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 moving more sideways than up or down indicating prices are not expected to change by much.
- 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 Resistance Levels To Be Aware Of:
2900 was support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong resistance
2795 is light resistance
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Fri Mar 1 2019
For Friday the technical indicators are losing strength. Only the Rate Of Change signal is advising no change is expected.
MACD issued an unconfirmed down signal and the Slow Stochastic strengthened its short-term down signal.
Without any positive news on trade negotiations with China, Friday could end lower. The best the market can hope for is that historically, the first trading day of March has seen indexes higher 65% of the time over the last 23 years. As well any positive news on China should send stocks higher and this evening data out of China showed the manufacturing index rose to a 3 month high. Chinese equities rose at the start of trading overseas and that could be enough to keep the S&P positive on Friday. For now I will take the stance of a lower close on Friday.
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