On Monday, stocks opened the day lower, nearing the 21 day moving average but with no real fallout from Iran, stocks rose back. In the afternoon news that China had a delegation preparing to travel to Washington to sign a trade deal help to lift stock higher and bring in more investors. While morning volume was low, afternoon volume picked up quickly and the index moved higher and closed positive on the day.
Stock Market Outlook Chart Comments At The Close on Mon Jan 6 2020
The SPX chart continues to be bullish despite the morning opening sell-off on Monday. The closing candlestick on Monday is bullish for Tuesday.
The index most reached the 21 day moving average at the open which brought in buyers. The Upper Bollinger Band is still rising while the Lower Bollinger Band is turned 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. 3200 is a very light support level but any kind of sell-off would break through it.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and moving sideways, unchanged from Friday.
- 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 Monday the up signal was almost gone.
- 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 back 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 neutral signal for Tuesday.
- 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.
- 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 moving sideways indicating a change in prices, higher or lower is not expected.
- 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 7 2020
The technical indicators on Monday are still not negative but there are some concerns, particularly MACD which is barely positive.
Despite this the S&P looks set to challenge the 3250 level on Tuesday. Any issues from Iran will send stocks lower but without any incident so far, the market is cautiously bullish.
That means take on smaller risk and wait to see what the rest of the week will bring for stocks. Tuesday is expected to end slightly higher.