Prior Trading Day Summary
On Thursday markets dropped again as yields continued to rise and in a speech and Q&A session from Fed Chair Powell investors came away with the expectations that no rate cut is likely in 2024. Investors heard Powell advise that until job growth slows and the economy slows, inflation is not expected to fall. With the government spending looking like it will continue to rise, analysts on Thursday questioned how long it would take for interest rates to fall. Most now expect no rate relief until into late 2025. Investors turned pessimistic and volumes on all exchanges rose as selling increased.
The SPX fell 36 points on 4 billion shares traded with 77% being traded to the downside. The index closed at 4278.
The NASDAQ lost 128 points on 5.1 billion shares traded. This is the highest volume since 5.2 billion on Sep 29. 71% of that volume was to the downside which was higher than Wednesday. The index closed at 13,186.
Let’s review the closing technical indicators from Thu Oct 19 2023 to see what to expect for Fri Oct 20 2023.
Stock Market Outlook: SPX Closing Chart For Thu Oct 19 2023
The index closed below the 50 and 100 day moving average which is bearish. It ended the day at the 200 day moving average.
The closing candlestick is bearish for Friday but also signals a chance for a bounce. A bounce on Friday though is unlikely to hold.
The 21 day and 50 day moving averages are still falling which is bearish. You can see in the chart that the 21 day is below both the 50 and 100 day and is lower once again.
The 200 day moving average is turning sideways which is bearish. The 100 day moving average is starting to fall, which is bearish.
The Lower Bollinger Band is turning sideways which is bearish. The Upper Bollinger Band is falling below the 50 day which is bearish and the Bollinger Bands Squeeze looks like stocks will move lower.
The S&P chart is quite bearish as of Thursday’s close. Sometimes this leads to a bounce, especially with the index brushing against the 200 day and closing at the lows for the day on Thursday.
Stock Market Outlook review of Thu Oct 19 2023
Stock Market Outlook: Technical Indicators Review
Momentum: Momentum is falling and still positive
|
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Tue Oct 10. On Thu Oct 19 2023 the up signal lost a lot of strength. A possible down signal is building which you can see in the histogram.
|
Ultimate Oscillator: The Ultimate Oscillator is falling and negative.
|
Slow Stochastic: The Slow Stochastic has a down signal in place and falling.
|
Relative Strength Index: The RSI signal is falling and negative. It is entering oversold readings.
|
Rate of Change: The rate of change signal is falling and negative.
|
Stock Market Outlook: Support and Resistance Levels |
| 4450 is resistance |
| 4435 is resistance |
| 4420 is resistance |
| 4400 is resistance |
| 4390 is resistance |
| 4370 is resistance |
| 4350 is resistance |
| 4325 is support |
| 4300 is support |
| 4275 is support |
| 4250 is good support |
| 4235 is support |
| 4225 is support |
| 4200 is good support |
| 4185 is support |
| 4175 is support |
| 4150 is good support |
Stock Market Outlook for Fri Oct 20 2023
For Friday the technical indicators are bearish again. The 4350 level has turned back to resistance as you can see in the Support and Resistance chart above.
With the index down at the 200 day moving average, there is a chance for a bounce but without any change in interest rates and yields there is little chance any bounce will hold at present.
On Thursday the Weekly Initial Unemployment Insurance Claims were lower at 198,000 which supported the bulls. But the leading economic indicators came in at -0.7% and existing home sales were high than expected at 3.96 million. These figures were enough to advise that the economy is continuing to do well and in many cases do better than many expected. The chance for any kind of rate cut is slim to none in this environment, while the chance of a November rate hike is higher than it was just a few weeks ago.
For Friday there is no change. A bounce attempt is likely but it won’t hold presently. That means dip buying is not a strategy to consider but buying protection on spikes higher is perhaps an idea although it could be a bit late in the downturn.
On Friday the SPX will end the day lower. Next week we could see the lows of early October revisited or even the 4200 level before a better bounce is attempted.
Potential Economic and Political Market Moving Events
The most important reports this week are retail sales on Tuesday, housing starts on Wednesday and leading economic indicators on Thursday. None of these appear favored for the bulls this week.
Monday:
8:30 Empire State manufacturing survey was expected to turn negative at -6 but came in at -4.6, not as bad as expected.
Tuesday:
8:30 Retail sales are expected to show a decline to 0.2% but instead rose to 0.7%
9:15 Industrial Production is expected to show a decline to 0.1% but instead rose to 0.3%
9:15 Capacity utilization is expected to stay unchanged at 79.7% and met estimates
10:00 Business inventories are expected to rise to 0.3% but instead rose to 0.4%
10:00 Home builders confidence is expected to be steady at 44 but instead fell to 40
Wednesday:
8:30 Housing starts are expected to rise to 1.37 million. They rose to 1.36 million.
8:30 Building permits are expected to fall to 1.45 million. They rose to 1.47 million.
2:00 Fed’s Beige Book could cause markets to fluctuate both before and after the minutes are released
Thursday:
8:30 Weekly Initial Unemployment Insurance Claims are expected to come in at 210,000 but came in at 198,000
8:30 Philadelphia Fed manufacturing survey is expected to be -6.8 but came in at -5
10:00 Existing Home Sales are expected to fall to 3.9 million but rose to 3.96 million
10:00 Leading economic indicators is expected to be unchanged at -0.4% but fell to -0.7%
12:00 Fed Chair Powell speech sent stocks lower
Friday:
There are no economic reports