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Stock Market Outlook for Fri May 10 2024 – Overbought – Dips Likely But Bullish

May 10, 2024 | Stock Market Outlook

Overbought But BullishPrior Trading Day Summary:

On Thursday stocks in the morning faced some selling which kept the index under pressure until late in the afternoon. When sellers pulled back the SPX moved higher into the close, reaching 5214, up 26 points to reach the highest level in a month for the S&P.

The Weekly Initial Unemployment Insurance Claims rose to their highest level since August 2023. Many analysts felt that the rise in unemployment signals that the higher interest rates are beginning to impact the labor market. This brought out more predictions that interest rates will be cut shortly, perhaps as early as June.

Through much of the day down volume was over 50% but by the close down volume had fallen to 23%.

On the NASDAQ the index rose 43 points to end the day at 16346. Volume was 4.7 billion with 37% of all volume to the downside by the close.

With many stocks overbought, let’s review the closing technical indicators from Thu May 9 2024 to see what to expect for Fri May 10 2024.


Stock Market Outlook: SPX Closing Chart For Thu May 9 2024

The index closed above the 21 day moving average and the 50 day and near the Upper Bollinger Band. This is bullish.

The closing candlestick is signaling that Friday will see some selling but a higher close is expected.

The 21 day moving average is still below the 50 day moving average for a down signal. It is still not showing signs of moving back up. This is bearish.

The 50 day moving average is climbing which is bullish.

The 200 day moving average is still climbing. The 200 day is at 4778 which is bullish and the 100 day is also climbing.

The Lower Bollinger Band is below the 100 day moving average and starting to turn lower. This is bullish. The Upper Bollinger Band is turning higher. This is bullish.

The S&P chart is strongly bullish for Friday.

SPX Stock Market Outlook review of Thu May 9 2024 – chart courtesy TradingView

 


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 on Fri May 3. The up signal gained more strength on Thu May 9 2024.

  • 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 and overbought.

  • 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 potential change 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 rising and positive. It is 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 rising indicating Friday will end higher.

  • 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.

Stock Market Outlook: Support and Resistance Levels

5275 is resistance
5250 is resistance
5225 is resistance
5200 is resistance
5190 is resistance
5175 is resistance
5150 is resistance
5125 is support
5115 is support
5100 is support
5075 is support
5050 is support
5025 is support
5000 is light support
4990 is light support
4975 is light support
4950 is support


Stock Market Outlook for Fri May 10 2024 

For Friday the technical indicators are signaling still higher for the S&P. The closing candlestick is bullish but often at the end of a week, this candlestick sees a dip into the close as investors take profits in overbought markets ahead of a weekend. For Friday then, watch for a potential dip to end the day. A dip on Friday though will be an opportunity to setup trades as the outlook is bullish even if Friday ends lower.

The Bollinger Bands are signaling that the index will move higher shortly. We could see the index challenge the 52 week high in the S&P next week.


Potential Economic and Political Market Moving Events

The main event this week is on Friday when the consumer sentiment is released.

Monday:

Two Fed Presidents speak. One at 12:50 and a second at 1:00 PM. Their comments are not expected to impact stocks.

Tuesday:

3:00 Consumer Credit expected to rise to $15.0 billion

Wednesday:

10:00 Whole inventories dipped to -0.4%

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims are expected to come in at 214,000 but rose to 231,000.

Friday:

10:00 Consumer sentiment is expected to come in at 76.0

2:00 Monthly federal budget is expected at 225 billion.






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