On Thursday everything from European woes over lack of growth and debt levels to more fallout on the Saudi issue to worries over China to rising bond yields to their highest level since 2008 spooked investors and resulted in heavy selling as the markets gave back much of Tuesday’s massive rally.
Stock Market Outlook Chart Comments At The Close on Thu Oct 18 2018
The index closed just above the 200 day moving average, although it reached it during the day.
The day was choppy with a large drop that came close to wiping out Tuesday’s huge rally.
The sell signal from the 21 day falling below the 50 day was confirmed and is continuing to decline.
This left behind a bearish candlestick for Friday.
All the major moving averages are turning lower which is bearish for the market at present.
The Lower Bollinger Band is also falling indicating the index is going to move lower.
Stock Market Outlook: Technical Indicators Review:
All indicators are moving higher on Tuesday.
Momentum: Momentum is negative and falling.
- 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 Sep 26. The signal was slightly weaker on Thursday although it is quite a strong down signal still.
- 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.
- 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 still has a weak up signal in place for Friday. This is the fourth up signal in a row.
- 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 turned down on Thursday.
- 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 again.
- 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:
2900 was good support – this will be strong resistance
2860 was good support – this will be resistance
2830 was light support and will be light resistance
2795 is light support
2745 to 2750 is light support
2725 is light support.
2700 is important support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Fri Oct 19 2018
Friday looks like it will move lower. There are though some signs to advise that Thursday big move lower may not be repeated as many of the signals did not see much change in their readings, despite today’s large sell-off. Often that indicates the index is going to bounce back.
For Friday then we could see a bounce, although in general the signals are still pointing to a lower day.
Stock Market Outlook Archives