Thursday saw stocks plunge again, giving back all the gains made in Wednesday’s big bounce. New lows were made intraday but trading volume did not increase on Thursday and the SPX ended the day just 7 points lower than where it had ended the day on Tuesday before Wednesday’s big bounce. Thursday felt more like a knee-jerk reaction to rising Treasury yields and a decline in the Weekly Initial Unemployment Insurance Claims which analysts believe will keep the Fed continuing to raise interest rates in November. Thursday’s decline in the Weekly Claims mean that more people are working and fewer are looking for work.
The SPX lost 78 points to end the day at 3640.47, down 2.1%. The NASDAQ fell 314 points to end the day at 10737.
Let’s review the close on Thursday to see whether selling will dominate on Friday.
Stock Market Outlook Chart Comments At The Close on Thu Sep 29 2022
At the close of trading the S&P closing candlestick is signaling that Thursday’s drop could still see a bounce of some kind but overall the candlestick points to a lower day.
The 21 day moving average continued its descent and the 100 day continued moving lower below the 50 day. Both are bearish signals.
The Upper Bollinger Band is falling but has not moved below the 200 day moving average which might suggest another bounce attempt. The Lower Bollinger Band is still falling indicating stocks have not yet bottomed.
All the moving averages are still falling which is bearish.
There are now 5 down signals in place since April and no up signals.
The chart is 95% bearish for Friday with the closing candlestick suggesting the index could try to bounce.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Thursday the down signal lost strength. The histogram also lost strength. Both signals are still very bearish but this is a second day of weaker readings.
- 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 and still 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 for a fourth day. Signals are still at readings we saw in mid-June before the market bounced. The indicator is signaling oversold.
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 and back into oversold readings.
- 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 slightly.
- 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:
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is light resistance
3925 is light resistance
3900 is light resistance
3875 is light resistance
3850 is light resistance
3825 is light resistance
3810 is light resistance
3800 is light resistance
3775 is light resistance
3750 is light resistance
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Fri Sep 30 2022
For Friday the technical indicators are pointing to a lower day on Friday but not with the strength lower we saw on Thursday. Indeed there are a handful of signals that suggest the index might even try to bounce. The outlook though is very bearish.
There are a variety of economic reports due out Friday morning. A few of them could move the market as they deal with inflation and inflation expectations.
Potential Market Moving Events
The biggest market moving event for the week is today when we get more inflation numbers.
8:30 Weekly Initial Unemployment Insurance Claims came in at 193,000 well below expectations of 215,000 and below the prior week’s 209,000.
8:30 Real GDP for second quarter came in at -0.6% in-line with estimates and unchanged from the prior reading.
8:30 PCE Price index and year-over-year
8:30 Core PCE price index and year-over-year
8:30 Real consumer spending and disposable incomes.
9:45 Chicago PMI
10:00 University of Michigan sentiment index
10:00 University of Michigan 5 year expected inflation index
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