Thursday Jan 16 saw the S&P open higher and break above 3300. From there the index turned sideways with hardly any dips or spikes for into the final hour of trading. That last hour saw volume rise and the S&P moved quickly higher closing at 3316.81, the best high of the day. The index is now extremely overbought.
Stock Market Outlook Chart Comments At The Close on Thu Jan 16 2020
The SPX chart continues to be bullish and the candlestick at the close of trading is bullish for Friday however the intraday move of the market sideways without hardly any dips or spikes is a classic sign of an extremely overbought market. More on that condition is below in the technical indicator review for this evening. The closing candlestick on Thursday moved outside the Upper Bollinger Band which is a signal of strength and extremely overbought condition.
The Lower Bollinger Band is continuing to rise abut you can also see that the Lower Bollinger Band is starting to turn back down which usually signals that there will not be a squeeze and the index is expected to move higher.
The 200 day moving average is now above the 3000 level and the 100 day is at 3100.
There are now four support levels in place. 3200 is very light support while 3100 and 3075 are better support. The best support is down at 3000 which is 8% lower.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and despite the big move higher in the close, it is still sideways which means the market is very overbought.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Friday Dec 13. At the close on Thursday the up signal was stronger.
- 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 not overbought and trending sideways despite the advance on Thursday.
- 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 is extremely overbought and has a weak 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 still trending sideways.
- 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:
3250 is resistance
3200 is light support
3100 is light support
3075 is light support
3030 is light support
3000 is support
2960 is light support
2950 was light support
2900 is light support
2860 is light support
2840 is support
2800 is strong support
Stock Market Outlook for Tomorrow – Fri Jan 17 2020
For Friday the technical indicators are showing us a very overbought S&P. The technical signals are all overbought. Normally we should be prepared for a day or more of some selling as the market this overbought, would bring in sellers. At this point however, most investors seem to want to continue to hold their positions. Caution is advised but the bias is still higher. If I had to choose I would be more cautious than bullish at the present time, but often a bullish market can remain bullish for an extended period of time, confounding market strategists who are used to acting on overbought signals. At some point soon there will be a more meaningful dip but for now that does not appear likely for Friday. I am expecting Friday will see a more choppy day than we saw on Thursday and a higher close.