Friday saw stocks end the week on good gains. The NASDAQ posted a third straight day of gains ended up 157 points to close at 10745, less than 100 points from the all-time high. The S&P closed at 3271 up three-quarters of a percent on the best volume of the month. This marked the third week of gains in July. Only last week was lower and by just 9 points.
Stock Market Outlook Chart Comments At The Close on Fri Jul 31 2020
The index fell once again on Friday to the 21 day moving average but that simply brought in buyers. The closing candlestick though is often a reversal, meaning a down day or a down morning could follow Friday’s close.
You can see in the chart that the Upper Bollinger Band has turned down and the Lower Bollinger Band has sharply risen above the 100 day. This is setting up another Bollinger Bands Squeeze that looks like the index may dip lower,
There are now 6 up signals and one down signal with the Lower Bollinger Band moving above the 100 day moving average.
The 21 and 50 day moving averages are climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market but the chart looks set to turn bearish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is back rising.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday July 8. On Tue Jul 28 2020 MACD issued an unconfirmed down signal on Friday, the signal was still not confirmed for the third straight day.
- 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.
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 slightly indicating a small chance of changes in prices for Monday.
- 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:
3275 is resistance
3200 is still resistance
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2500 was good support and marked a correction of 26.3%
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a 41% correction from the all-time high. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Mon Aug 3 2020
For Monday the index looks like it may dip back to start the month. The S&P is sitting just below resistance which is at 3275 which could also assist in pushing the index back lower. However any dip, even a deep one, will find ready buyers.
Monday could end up being fairly choppy with a number of dips but the bias continues to lie to the upside for stocks to start off August.