Friday saw the anticipated bounce higher with a strong showing by the S&P gaining 35 points to close at 4441. The index is just 39 points from its all-time high.
Let’s review Friday’s bounce to see what technical changes occurred and what investors should expect for Monday.
Stock Market Outlook Chart Comments At The Close on Fri Aug 20 2021
On Friday the S&P closed above the 21 day moving average which is bullish but it left behind a bearish candlestick for Monday.
The Lower Bollinger Band and Upper Bollinger Band have turned sharply into a Bollinger Bands Squeeze which at present is positions to send the index lower. You can see in the chart how tight this squeeze is. The last squeeze this tight sent the index higher, mid June.
All the major moving averages are still climbing which is bullish. For Monday the SPX chart remains predominantly bullish.
Stock Market Outlook review of Fri Aug 20
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and turned positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday Aug 18. On Friday the down signal was still strong.
- 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 a down signal in place and not 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.
- 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:
4475 is resistance
4450 is resistance
4400 is light support
4370 is support
4350 is light support
4300 is light support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good 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 23 2021
For Monday the technical indicators are mixed. MACD is indicating lower along with the Slow Stochastic. The other four technical indicators are rising, indicating Monday should be higher.
Meanwhile the chart shows a very tight Bollinger Bands Squeeze has formed. The last squeeze this tight was mid-June which sent the index higher.
The closing candlestick is bearish for Monday as it indicates the index is likely to have a slightly lower close.
With a mixed outlook for Monday, the bias has to go to the bulls where there are more technical signals supporting a move higher.
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