Much of Thursday was a “knee-jerk” reaction by investors who are of the opinion the Fed is “wrong” on the interest rate outlook. They believe inflation will rise strongly and interest rates will have to rise.
When the treasury yields moved higher late morning into the lunch hour investors started to sell and as we know, selling breeds more selling. The lower the index fell, the more sellers turned up. But this is not a crisis and the selling, as see in the technical indicators, was overdone. The S&P dipped back to 3910 before closing slightly above that at 3915. The NASDAQ lost 409 points to bring it back down to 13,116. Let’s review the technical indicators from Thursday’s close to see what the outlook is for Friday.
Stock Market Outlook Chart Comments At The Close on Thu Mar 18 2021
The Bollinger Bands Squeeze is continuing to widen. This remains bullish for the index. The closing candlestick on Thursday is bearish for Friday but it is also typical of a bounce signal.
The index held the 21 day moving average but the drop pressured the 21 day lower. The 50 day could rise above the 21 day next week unless we see further upside action. A move above the 21 day by the 50 day would signal more weakness so that’s something to watch for.
The 50, 100 and 200 day moving averages are all climbing higher. Despite the selling, the chart is still quite bullish.
Stock Market Outlook review of Thu Mar 18 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is turned sideways but positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Thursday March 11 2021. On Thursday the up signal lost some strength.
- 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 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.
- 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:
4000 is resistance
3900 is support
3850 is support
3800 is support
3750 is good support and the 100 day is at this level
3700 is light support
3680 is light support – The 100 day moving average is at this valuation.
3600 is strong support
3550 is support – The 200 day is at this level. A drop this low would be a 10% correction.
3500 is strong support
3450 is support
Stock Market Outlook for Tomorrow – Fri Mar 19 2021
For Friday I am expecting the index to slip to 3900 which is not all that far away. That though should bring in buyers.
A test of 3900 was not unexpected and this is how the index builds support to push higher. Investors are still rotating out of tech stocks and moving into bank stocks where they believe they will be “safer”. However many tech names will continue to do well and should do even better if there is some inflation. Companies like Microsoft will definitely do well so selling them off will bring better opportunities.
At some point investors will realize that the banking sector is overbought or becoming overbought and they will look elsewhere for gains. That could lead them right back to the tech stocks they are presently leaving.
For Friday expect some weakness, a test of 3900 is likely and then a rally back. There is a good chance for a positive close which, considering that the S&P fell all the way to 3915, would be not much of a stretch to see happen.
On Wednesday the S&P reached 3983. The close on Thursday saw a total loss of 68 points from that high. That’s a dramatic drop and while more selling has to be expected, a bounce is also quite likely to end Friday higher than 3915.
Stock Market Outlook Archives
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Stock Market Outlook For Fri May 1 2026 – Overbought But Higher
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Stock Market Outlook For Thu Apr 30 2026 – Dips Likely Possible Lower Close
Morning Investing Strategy Notes for Wed Apr 29 2026
Stock Market Outlook For Wed Apr 29 2026 – Choppy But Higher Ahead Of More Earnings
Morning Investing Strategy Notes for Tue Apr 28 2026
