Thursday saw stocks open the day lower and then rally for most of the day to close mildly positive on the day.
It was a calm day for the markets, the first in almost a month and it may have setup Friday for investors to be cautiously bullish.
Stock Market Outlook Chart Comments At The Close on Thu Mar 19 2020
The SPX chart continues to be very bearish. Today the S&P fell through my goal of 2344, reach 2319 but was well above yesterday’s bear market record of 2280.
The closing candlestick is neutral to slightly bullish. It was once again inside the Lower Bollinger Band which gives it room to tumble but the candlestick also has a long tail which advises there was a lot of buying on Thursday which could tide over into Friday.
The Upper Bollinger Band is continuing to turn down which is a bit troubling and the 3 sell signals in the chart are continuing to gain momentum to the downside.
All the moving averages are moving lower with the 50 day back below 3200 and the 21 day falling well below the 3000 valuation.
The Lower Bollinger Band is falling rapidly which is a signal for more downside ahead.
Overall the chart is ugly for equities but the past two days have seen the candlesticks with long tails both days which are indicating buyers are present and we should see them again on Friday. There is a good chance the index may try to retake 2500 on Friday.
Stock Market Outlook review of Thu Mar 19 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising, negative and oversold. You can see in the chart that each rally has created a lower spike. We need that to reverse and see stronger momentum spikes. Right now it is very bearish.
- 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 is still quite strong but it has been losing strength all week. This could assist a move up on Friday.
- 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 moving sideways but again you can see that each prior rally is setting up a pattern of lower spikes. That too needs to reverse. However if you look at today’s move, the Ultimate Oscillator is back near spike highs and may move above 50 on Friday which would signal a move up.
- 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 an up signal in place and is extremely 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 moving sideways and just above an oversold reading.
- 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. Each prior spike higher has also been lower which again we need to see reverse. Right now the rate of change is indicating prices might begin to stabilize a bit.
- 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:
3000 is resistance
2960 is light resistance
2900 is light resistance
2860 is light resistance
2840 is light resistance
2800 is strong resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is strong resistance and was a drop of 20.4%.
2675 is light resistant
2650 is resistance
2625 is light resistance
2600 is resistance
2550 is light resistance
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. More analysts are jumping onto this level as where the correction is heading.
Stock Market Outlook for Tomorrow – Mar 20 2020
Friday is triple witching so we could see some wide swings but at the same time, a lot of investors are out of their option trades so instead, it might not be as wild as we might expect.
There are some signs that the day could start again with a smaller dip than we saw on Thursday and then the index may try to push higher and retake 2500. I do not expect the dip to be any lower than 2344.
The past two days buyers have been present and the panic on Wednesday which saw a new bear market low as well as a new 52 week low in the SPX was below the 2344 support level which brought in buyers. That level is strong support for the index and I have mentioned many times that 2344 should stall a sell-off except a panic induced one.
As more testing for the coronavirus is done, we will see the numbers of infected rise dramatically and we should prepare for a spike in mortalities which will weigh on stocks when that happens. But for now, I am expecting a calmer day on Friday. The index may try to reach 2500 to end one of the worst weeks on record for the markets.
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