Stock Market Outlook for Mon Aug 2 2021 – Bounce Likely To Start August

On Friday stocks moved lower to end the month of July with the S&P down 23 points to end the month at 4395. For the month of July the S&P was up 2.2% and the NASDAQ ahead by 1.1%. For 2021 the SPX is now up 17% and the NASDAQ is up 13.8%

These are excellent returns with still 5 months left in the year.

August has the unique history of being the worst month historically since 1987 with the S&P having only 7 positive Augusts since 1997. Needless to say August can be problematic and historically the first trading day of the month has been negative70% of the time. Let’s look at the final trading day of July to see how Monday may stack up.

Stock Market Outlook Chart Comments At The Close on Fri Jul 30 2021 

On Friday the S&P traded lower and closed down 23 points. This though left behind a potential bounce signal candlestick for Monday. You can see in the 90 day chart below a number of similar signals which are followed by bounces. The most recent was July 8.

The Upper Bollinger Band is still climbing while the Lower Bollinger Band is stuck at the 50 day moving average. Both signals are more bullish than bearish at present.

All the major moving averages are still climbing which is bullish. The chart is dominantly bullish for the first trading day of August.

Stock Market Outlook review Fri Jul 30 2021

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 Mon Jul 26. On Friday the up signal was much weaker.

• 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 falling for a fourth straight day.

• 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 still has a down signal in place and is still 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 falling..

• 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.

• 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:

4400 is resistance

4370 is resistance

4350 is light support

4300 is light support

4290 is light support

4270 is light support

4250 is light support

4225 is light support

4200 is light support

4175 is light support

4150 is light support

4100 is good support

4070 is light support

4050 is light support

4000 is good support

3900 is support

3850 is support

3800 is support

3750 is good support

3700 is light support

3680 is light support

3600 is strong support

 Stock Market Outlook for Tomorrow – Mon Aug 2 2021 

For Monday the technical signals are primarily showing weakness which this year has almost always resulted in a bounce.

The closing candlestick on Friday pointed to a potential bounce for Monday. but then there is that negative history of the first trading day of August to contend with. I’m going with a bounce for the first day.

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