Friday Jan 24 saw markets take a turn lwer as fear of the latest virus out of China was an excuse to sell out of positions.
All 3 indexes ended the day lower. This was the first weekly decline in 9 weeks and there is a good chance we will see another lower week for the final week of January. More on the outlook and trade ideas for the week in the members Market Breadth Indicator outlook this evening.
On Friday the S&P was on a slide falling all morning until the lunch hour when it tried to bounce off the 3300 light support level. That failed and by 1:00 PM the slide continued until by 2:30 the index was down to below 3285. With the index oversold intraday, a bounce had to occur and the index pushed back twice and both times almost retook 3300. It closed the day at $3295.
Stock Market Outlook Chart Comments At The Close on Fri Jan 24 2020
The SPX chart cturned bearish on Friday with a long red candlestick almost reaching the 21 day moving average. A drop this low in one day is almost always followed by several days of selling.
The Lower Bollinger Band is falling and we should see the Upper Bollinger Band dip lower on Monday, matching the Lower Bollinger Band downturn.
All the moving averages are still climbing.
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.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is barely positive and is falling.
- 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 Friday the up signal changed to an unconfirmed 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 signal is not overbought and falling lower for Monday. It is near negative readings.
- 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 still overbought and has a down 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 falling and no longer 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 also falling indicating lower prices are ahead to start off the week.
- 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:
3325 is resistance
3200 is light support
3100 is light support
3075 is light support
3030 is light support
3000 is good support and if the S&P fell this low it would mark a normal correction in a bull market
2960 is light support
2900 is light support
2860 is light support
2840 is good support
2800 is strong support
Stock Market Outlook for Tomorrow – Mon Jan 27 2020
For Monday fear of the coronavirus will keep investors in a selling mood. The index will open lower and after half an hour try to rally. The rally will fail and the index will end the day lower for Monday.
We will probably see further selling to start the week which means there is no rush to setup trades as there should be plenty of time this week, certaily at the start of the week, to setup trades.
While the bias is lower for the start of the week and could last a few days, the underlying trend is still higher. That means the deeper the dips are the better trades will end up being once the index turns back around. For Monday however, sellers will be in charge.