The futures for Monday’s open are pointing to a large decline of 145 points on the S&P and 410 on the NASDAQ to begin the day. Most of these is the result of an oil price war between Russia and Saudi Arabia where no one will probably end up a winner. Add in the latest coronavirus fears and the chance of a recession is probably now much higher which will lead to even more pessimism on the market’s outlook. The futures may bounce before Monday’s open, but investors should be prepared for another rough day and tough week.
Stock Market Outlook Chart Comments At The Close on Fri Mar 6 2020
The SPX chart is very bearish. The index closed the day under the 200 day moving average and below 3000. The late afternoon rally from the day’s lows was nice to see but the closing candlestick indicates the market will reverse lower on Monday which now seems obvious.
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. This is the 4th day below the 200 day moving average. Normally, two closes below the 200 day advises investors to put on some protection, even a small amount just in case a correction turns nasty.
The Lower Bollinger Band is falling rapidly which is a signal for more downside this week. The Upper Bollinger Band is starting to turn down, which is another signal to be watching.
Stock Market Outlook review of Fri Mar 6 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling lower. It is again signaling 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 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.
- 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 Monday.
- 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 not oversold, leaving room for the markets to fall lower.
- 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, indicating lower prices are picking up momentum. It also is at oversold levels.
- 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 good support
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 Mar 9 2020
For Monday even if the futures pop back up, the outlook is decidedly negative. The chance of the index revisiting and breaking the Feb 28 low of 2855 is extremely high for Monday.
Last week the market tried to bounce back up with two strong bounces, both of which were historic in size. None of that has made a difference. With the coronavirus news continuing to show further infections globally and now the obvious outbreak of an oil war between Russia and Saudi Arabia, the chance of a recession is much higher. That will bring in more selling and a new low. The original outlook just before the correction started was for a 20% decline. That seems very likely after the weekend oil war outbreak. There is good support for the S&P at 2800 but a 20% correction would see the S&P down to 2715.
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