The most important event on Thursday was for the SPX index to hold the 3900 support level, after Wednesday’s massive sell-off.
By the end of the day the SPX was down 22 points to end the day at 3900.79. The NASDAQ lost 29 points ending the day at 11388.
The seeming calm on Thursday is not unusual after a big sell-off day. Next week will be more important for stocks.
Let’s review the closing technical indicators from Thursday to see what to expect for Fri May 20 2022.
Stock Market Outlook Chart Comments At The Close on Thu May 19 2022
On Thursday the closing candlestick indicated a bearish bounce could still be attempted but the primary signal is still bearish.
The Upper Bollinger Band is falling sharply. The Lower Bollinger Band is starting to trend sideways.
All moving averages are bearish and there was a new sell signal on Monday May 16 as the 100 day moving average fell below the 200 day. That means the 200 day moving average is now leading the market. This is bearish and usually signals more selling to come.
All the major moving averages are falling including the 200 day. The 21 day is still falling rapidly.
The chart is 95% bearish for Friday. That often means an early bounce could happen before more selling.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative. With momentum strongly negative any bounce is not going to hold.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal Friday April 8. On Thursday the down signal gained to the bearish side as did the MACD histogram. It was not a large move down but enough to warn that we could see further selling on Friday or early next week.
- 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 and negative.
- 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 no longer oversold.
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 and on the verge of oversold readings.
- 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:
4400 is resistance
4370 is light support
4350 is light resistance
4300 is light resistance
4290 is light resistance
4270 is light resistance
4250 is resistance
4225 is light resistance
4200 is light resistance
4150 is light resistance
4100 is light support
4050 is light support
4025 is light support
4000 is good support
3975 is light support and is a decline of 17.5%
3900 is light support and is a decline of 19%
3850 is good support and is a decline of 20%
3600 is good support at is a decline of 25%
Stock Market Outlook for Tomorrow – Fri May 20 2022
For the final day of what has been a tumultuous week, the market looks ready to try a second bounce. The chance of this bounce holding is slim but it would be good to end the week still at 3900 or higher, although that seems unlikely. Next week is important for stocks and could setup the index for more weakness in June unless investors can spark a rally of some size next week.
Potential Market Moving Events
On Thursday the Weekly Initial Unemployment Insurance Claims came in at 218,000 which was higher than the 200,000 expected but not enough to make any impact to inflation.
Existing home sales came in a 5.61 million, down from 5.75 million for the prior month.
No market moving reports