Stock Market Outlook for Fri Oct 23 2020 – More Weakness But Possible Higher Close

On Thursday hope for a stimulus bill was enough to send stocks higher into the close with the S&P up almost 18 points to close at 3453.49, back above 3450.

Stock Market Outlook Chart Comments At The Close on Thu Oct 22 2020

On Thursday the index pushed higher, leaving behind a bullish candlestick for Friday. As well the up signal from Oct 21, when the 21 day moving average rose above the 50 day, continued to gain strength.

There are however some early signs that a Bollinger Bands Squeeze might occur mid to late next week as the Upper Bollinger Band is falling and the Lower Bollinger Band is rising.

The 200, 100, 50 and 21 day moving averages are climbing.

The index still looks bearish but there is a bullish stance still present.

Stock Market Outlook review of Thu Oct 22 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling but 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 Oct 1. On Thursday an unconfirmed down signal was issued. If Friday’s signal is still lower, it will confirm Thursday’s down 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 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 down signal in place but could easily turn back up for an up signal on Friday if the index continues to move higher.

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 rising.

• 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

2975 is light support

2950 is light support

2900 is light support

 Stock Market Outlook for Tomorrow – Fri Oct 23 2020 

For Friday the outlook is still for some weakness and dips but it all hinges on more news on a stimulus package. Most investors believe a stimulus package must come before the elections and they are betting on it as they continue to hold the index more sideways than up or down. On Thursday at the close MACD issued a new but unconfirmed down signal which may play a part on Friday.

For now the outlook is for weakness with a potential for a higher close. Any negative news on the stimulus package though, and the day will end negative.

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