Thursday saw stocks move higher and close back where they had been on Wednesday before markets sold lower in the final hour of trading. With the April unemployment number due out on Friday, much of the day’s movement will be determined by investor response to those jobs numbers. Let’s look at the close on Thursday and see what we might gleam for Friday.
Stock Market Outlook Chart Comments At The Close on Thu May 7 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and now a Bollinger Bands Squeeze. There is one up signal from May 1 with the 21 day moving average back above the 50 day.
The 200 day moving average is still leading the market, which is typical in a bear market. It is still followed closely by the 100 day. The 50 day is continuing to fall rapidly while the 21 day is rushing higher and could cross the 100 day moving average by early next week which would be a second up signal.
The closing candlestick on Thursday was bearish for Friday. The Bollinger Bands Squeeze is underway without any clear indication which way the market will move as it comes out of the squeeze.
Stock Market Outlook review of Thu May 7 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and back 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 26. The up signal was weak again on Thursday and ended the day at 3.87 which is near a sell signal if the index were to stumble.
- 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 rising but 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 an up 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 rising.
- 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 moving primarily sideways.
- 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:
2900 is resistance
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Fri May 8 2020
For Friday the April unemployment number is expected to be horrific. Analysts are expecting the highest recorded unemployment number since stats were kept. Other analysts are expecting the unemployment number to jump anywhere from 11% to as high as 21%. This will be a historic event. The question now is whether the index can continue to ignore a growing list of “bad news” items and stay at or above 2800 on the S&P. We should have a major clue by the lunch hour on Friday.
Meanwhile the chart and technical indicators from Thursday are somewhat bullish. None of the technical indicators are pointing to a major move lower except for the Bollinger Bands Squeeze. Between the Squeeze and MACD dropping from a strong up signal to a very weak one, caution should be observed, at least until Tuesday next week. For Friday then, the market direction is all about investors’ reaction to the jobs numbers.
Stock Market Outlook Archives
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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
Morning Investing Strategy Notes for Tue Apr 23 2024
Stock Market Outlook for Tue Apr 23 2024 – Bounce But Lower
Morning Investing Strategy Notes for Mon Apr 22 2024
Stock Market Outlook for Mon Apr 22 2024 – No Change – Deeply Oversold Bounce Possible
