Following Wednesday’s Fed induced rally, investors returned to buy stocks today and pushed indexes higher for a third straight day. All three indexes are moving toward short-term oversold signals but there is still room for a third day of gains. Friday though is also triple witching which often sees volatility and wider swings. This has not been as commonplace in the last few years. That means Friday may not be as volatile as expected, but bigger swings can occur, especially later in the day on Friday.
The S&P ended the day on Thursday up 53 points to 4411. The NASDAQ rose 178 points to close at 13,614. The gains today were excellent but they are smaller than the gains from the prior two days of the rally which signals that the rally at this point is slowing as stocks come off their lower levels from the recent correction.
Let’s review the closing technical signals from Thu Mar 17 2022 to see what is in-store for investors on Friday.
Stock Market Outlook Chart Comments At The Close on Thu Mar 17 2022
There were some interesting changes in the S&P chart following Thursday’s close. The most interesting perhaps is the closing candlestick which is finally back above the 200 day moving average. The candlestick is a long green candlestick indicating that stocks closed at the highs of the day. It is the third long green candlestick. It is also signaling that while Friday will be higher, it won’t rally as strongly as the prior 3 days. That is though, only natural as many stocks have climbed strongly from being oversold in the correction.
The Upper Bollinger Band is continuing to turn lower but the Lower Bollinger Band is moving sideways which could signal an interim bottom is in place at present. The Upper Bollinger Band reached the 100 day moving average today and is ready to cross below it. That will be bearish when it occurs.
The SPX has 4 down signals in place. The 200, 50 and 100 day 1moving averages are falling lower. The 21 day moving average however is moving sideways, a sign of the beginning of a recovery.
The chart remains bearish as of Thursday’s close but there are still some signals that advise the index will close positive for a fourth day. Monday however could see the index close negative.
Stock Market Outlook review of Thu Mar 17 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal Wed Mar 16 2022. Today the MACD signal was strongly confirming the uptrend with a huge reading of 15.33. This is a strong up signal. The MACD histogram also turned positive and moved higher in also a strong showing.
- 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 for a third day and positive.
- 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 still has a strong up signal in place and could be ready to moving into overbought readings shortly.
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 rising for a third day and into overbought signals.
- 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 indicating there is a chance of a negative day on Friday or more likely, Monday.
- 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:
4500 is resistance
4490 is light resistance
4475 is light resistance
4450 is light resistance
4400 is resistance
4370 is light resistance
4350 is light resistance
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
4150 is good support
4000 is good support
Stock Market Outlook for Tomorrow – Fri Mar 18 2022
On Thursday at the close the Moving Average Convergence / Divergence (MACD) technical indicator issued a strong up confirmation. Even if the index slips on Friday or early next week, this is a very strong reading which signals there is more upside ahead of the index.
Some of the rally was relief that the Fed’s interest rate decision is out-of-the-way and that expectations of further interest rates has been realized. That means one big unknown is finally out-of-the-way.
It’s triple witching on Friday which is part of the reason the Rate Of Change is falling rather than rising. It is warning investors that some selling should be expected. Indeed we should expect sellers on Friday as 3 days of a rally has left a lot of bears behind. On top of this many investors are ready to take profits after a third day of rallying. However once the sellers are done, the index is ready to move higher.
On Thursday I bought SPY calls early morning as outlined in yesterday’s Stock Market Outlook. These were sold at the close on Thursday. On Friday any dips that are deep enough, perhaps down to 4385 or 4380, will find me buying SPY calls for a further push higher in the index.
For Friday then, expect dips, some to be deep and definitely moving the index back below 4400. They are though opportunities as the index will move back above 4400 and still higher to end the day on Friday.
Stock Market Outlook Archives
Stock Market Outlook for Fri May 3 2024 – All About The April Non-Farm Payroll Report
Morning Investing Strategy Notes for Thu May 2 2024
Stock Market Outlook for Thu May 2 2024 – Potential Bounce But Lower
Morning Investing Strategy Notes for Wed May 1 2024
Stock Market Outlook for Wed May 1 2024 – Bounce But Lower – Fed Interest Rate Decision
Morning Investing Strategy Notes for Tue Apr 30 2024
Stock Market Outlook for Tue Apr 30 2024 – Dips Likely – Flat To Higher Close
Morning Investing Strategy Notes for Mon Apr 29 2024
Stock Market Outlook for Mon Apr 29 2024 – Some Weakness But Higher
Morning Investing Strategy Notes for Fri Apr 26 2024
Stock Market Outlook for Fri Apr 26 2024 – Higher and Positive Close
Morning Investing Strategy Notes for Thu Apr 25 2024
Stock Market Outlook for Thu Apr 25 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 24 2024
Stock Market Outlook for Wed Apr 24 2024 – Some Weakness But Higher Close
