On Friday the index surprised with a further strong rally with the S&P closing up 1.7% to 4280 and the NASDAQ rising 2% to 13047.
Both indexes are showing a broadening of the rally as more stocks join in and new 52 week highs are finally outpacing new lows by a wider margin. While the start of the rally was attributed to an oversold market and short covering as it rose, the market is now overbought but with a wider base of support. This week investors get retail numbers from many companies but in particular the giants of Walmart and Target report Tuesday and Wednesday respectively and all eyes will be on their quarterly earnings numbers.
Let’s review the closing technical indicators from Friday to see what to expect for Mon Aug 15 2022.
Stock Market Outlook Chart Comments At The Close on Fri Aug 15 2022
The closing candlestick is bullish for Monday. It also indicates the index is overbought and dips should be expected. However as we have previously seen, dips remain opportunities to setup more trades.
The 21 day moving average is still rising and should move above 100 day early this week for a second up signal. The 50 day moving average is also turning higher. Both are bullish.
The first up signal since April was released Tuesday Aug 2 when the 21 day moving average crossed above the 50 day moving average.
The Upper Bollinger Band is rising and continued to move above the 200 day moving average which is bullish.
The Lower Bollinger Band is climbing higher again which is bullish.
The 200 and 100 day moving average are still falling which is bearish.
There are 3 down signals still in place and one new up signal.
The chart is 85% bullish for Monday. The early morning may see dips but the close will be higher.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday June 27. On Friday the up signal gained strength. The histogram also improved. Both are bullish.
- 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 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 has an up signal in place and is overbought.
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 and overbought.
- 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 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:
4300 is stronger resistance
4290 is light resistance
4275 is light resistance
4265 is light resistance
4250 is stronger resistance
4220 is light support
4200 is light support
4150 is light support
4100 is light support
4050 is light support
4025 is light support
4000 is light support
3975 is light support and is a decline of 17.5%
3900 is light support and is a decline of 19%
3850 is light support and is a decline of 20%
3825 is light resistance.
3800 is good support.
Stock Market Outlook for Tomorrow – Mon Aug 15 2022
For Monday, the S&P chart is 85% bullish. The morning has the better chance of dipping back, especially early morning. Dips though are opportunities to setup trades. This week investors get retails numbers from a number of important companies including Walmart which previously warned about missing earnings for this quarter. Target had missed earnings last quarter and most analysts believe they will again.
For Monday the technical indicators are all pointing higher as the index moves into overbought signals. Despite this, the index will close higher on Monday ahead of Walmart reporting earnings on Tuesday.
Potential Market Moving Events
There are a number of potential market moving events this week but the primary focus will be on retail earnings. None of the economic reports on Monday should move the markets.
8:30 Empire state manufacturing index which is expected to come in a 5.0, half of the prior reading.
10:00 NAHB home builders index which is expected to be 54, down slightly from the prior reading of 55.