The key event on Thursday was the confirmation of the short-term sell signal from MACD technical indicator.
Stock Market Outlook Chart Comments At The Close on Thu May 2 2019
On Thursday the S&P slipped below the 21 day moving average before pushing back above it and closing above it. Normally we will see another retest as it is rare for the index to slip below the 21 day and immediate recover, so be prepared for some further weakness. If you look at the chart for the S&P below, you can see in late March the S&P fell to the 21 day and retested it 4 additional times before moving back up. Again in early March it fell through the 21 day and then moved back up after 3 days.
The candlestick at the close on Thursday was bearish for Friday.
Note that the Lower Bollinger Band has moved still higher above the 50 day moving average and the Upper Bollinger Band is turning down as well. A new Bollinger Bands Squeeze seems likely which could be the pullback or dip for May which so many analysts are waiting for.
All major moving averages are moving ahead with the 50 day and 100 day both moving away from the 200 day. The 100 day is now at the 2800 level.
Stock Market Outlook review of Thu May 2 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and unchanged.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday May 1. On Thursday the sell signal was confirmed.
- 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 positive and 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 strong down signal in place.
- 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 indicating lower prices lie ahead.
- 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:
2950 is resistance
2900 is light support
2860 is light support
2830 is light support
2800 is strong support
2795 is light support
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.
Stock Market Outlook for Tomorrow – Fri May 3 2019
On Friday the market action will be dictated by the jobs numbers. At the same time, we also have a confirmed down or sell signal from MACD to contend with.
The non-farm payroll numbers from April are important then and could be pivotal for a few days. The consensus is for 180,000 new jobs to have been added to the economy and the unemployment rate to stay at 3.8%.
Friday’s numbers are released at 8:30 and we should have a fairly good indication of the market direction by 9:30 when the markets open.
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