Thursday’s rally was another solid day for the bulls. The rally started to run out of steam with Fed Chair Powell spoke and discussed the “long-road” back from where the economy was prior to Covid-19. This took the “wind” out of the rally but it was also quite overbought by Thursday, the fourth day of the rally.
Stock Market Outlook Chart Comments At The Close on Thu Nov 5 2020
Thursday’s rally was almost as strong as Wednesday’s. This left behind a bullish candlestick for Friday but with a shorter tail which usually indicates the rally is becoming overbought and will be slowing.
The Upper Bollinger Band is still rising and the Lower Bollinger Band is turning sideways. The 21 day moving average and 50 day are also turning higher as are the 100 and 200 day moving averages.
The up signal from Oct 21 is still in play, and the chart has turned back to bullish. A dip after four days of a strong rally is likely.
Stock Market Outlook review of Thu Nov 5 2020
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 a down signal on Oct 25. On Thursday MACD issued an unconfirmed up signal.
- 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.
- 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 and 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 sideways which may confirm the overbought signals.
- 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:
3600 is resistance
3500 is resistance
3450 is support
3400 is support
3375 is support
3300 is support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
Stock Market Outlook for Tomorrow – Fri Nov 6 2020
After four strong days of rallies many stocks are overbought and the index appears ready to turn sideways and probably see a few dips back below 3500.
Next week the index could easily see a new all-time high but for Friday the outlook is overbought and a chance for a lower close.
Of particular note is the up signal from MACD which is not confirmed as of yet but could be by the close of trading on Friday.
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