Monday’s collapse was yet another one for the record books. The S&P closed down 7.6%. The Dow closed down 2013 points for a 7.79% loss. The NASDAQ plunged 625 points for a 7.29% drop. It was the largest single day percentage loss since 2008 with the primary culprit being an oil price war between Saudi Arabia and Russia. Circuit breakers kicked in early near the open of trading, the first time they have been used since 1997.
The futures Monday evening however show a potential bounce as the Trump administration looks at a variety of ways to keep the economy from slipping into a recession in the face of more coronavirus infections.
Stock Market Outlook Chart Comments At The Close on Mon Mar 9 2020
The SPX chart continues to be very bearish. The index closed the day well below the 3000 support level at 2746, now down 647 points from its all-time high marking a 19% correction.
The 21 day moving average continues to decline further since the confirmed sell signal of March 2. All the moving averages are now turning lower including the 200 day.
The Lower Bollinger Band is falling rapidly which is a signal for more downside this week. The Upper Bollinger Band is back climbing indicating an oversold market which could see a bounce however any bounce at this point will not change the trajectory lower, just stall or slow it.
Stock Market Outlook review of Mon Mar 9 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling lower. It is oversold.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Feb 21. The down signal gained further strength on Monday and readings show oversold.
- 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 falling.
- 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 a down signal in place for Tuesday and not yet 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 oversold.
- 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 sharply, and at strong oversold levels indicating that the selling was intense on Monday and should see a bounce Tuesday.
- 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:
3400 is resistance
3300 is resistance
3200 is resistance
3100 is light resistance
3075 is light resistance
3000 is resistance
2960 is light resistance
2900 is light resistance
2860 is light resistance
2840 is light resistance
2800 is strong support
2700 is strong support and marks a full correction of 20.4%.
Stock Market Outlook for Tomorrow – Tue Mar 10 2020
The collapse was dramatic and severe on Monday and took the S&P almost to the original goal of a 20% correction. With the market oversold we should see a bounce back attempt on Tuesday but it won’t hold. Any bounce at present will slow or even stall the decline but a full correction is still underway. This correction will take time to work out.
For Tuesday bounces should be used to take profits in positions taken on Monday as there is more downside still ahead for the index. The bounce attempt on Tuesday could last for the day and end the day higher.
The bounce will find ready sellers who failed to get out last week or Monday and who will want out now. Watch for more weakness after any bounce attempt after Tuesday.
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