Stock Market Outlook for Jan 3 2020 – Lower Open, Choppy With Negative Close

Thursday saw all new highs in the indexes but for Friday, geopolitical events threaten to end the Santa Claus Rally on a rather sour note. A US military strike in Baghdad has the futures considerably lower as investors try to weigh the outcome or side effects of the military strike

Stock Market Outlook Chart Comments At The Close on Thu Jan 2 2020 

The SPX chart continues to be bullish. The closing candlestick on Thursday was bullish for Friday.

The Upper Bollinger Band is still rising while the Lower Bollinger Band has now started to turn up as well, which is bullish.

All the major moving averages are still climbing and there are three support levels in place. 3100 and 3075 are both light support with better support down at 3000.

Stock Market Outlook review of Thu Jan 2 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is positive and rising.

• 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. On Thu Jan 2 the signal was still pointing higher for the index.

• 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 is rising.

• 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 overbought and has a very weak 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 rising back into overbought 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 also 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:

3250 is resistance

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

2795 is light support

2745 to 2750 is light support

2725 is light support

2700 is light support

 Stock Market Outlook for Tomorrow – Jan 3 2020 

For Fri Jan 3 2020 the technical indicators are pointing to more upside for the index, however geopolitical events will hinder the advance on Friday.

With the futures pointing down for the open, I will be using any weakness to setup trades as I believe any drop at this stage of the rally is an opportunity. I think we will also see many other investors taking advantage of the weakness on Friday.

The outlook then is for weakness, especially at or near the open. A choppy day of trading should develop but I am expecting the markets to quickly recover. A negative close is probable especially as it is a Friday and many investors will not want to hold positions over the weekend due to the military strike and the uncertainty it has created. By next week however I am expecting the rally to continue.

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