Friday saw a weaker than expected non-farm payroll number and a revision for the prior month which was slightly lower as well. Investors took this as another sign of potentially slowing in the economy. This combined with a further deterioration with China sent more investors to the exit.
Let’s review the close on Fri Dec 7 and see what it can tell investors for Mon Dec 10 2018.
Stock Market Outlook Chart Comments At The Close on Fri Dec 7 2018
The S&P chart is now extremely bearish. The index is nearing the lows of the correction from back at the end of October. Unlike the October lows however, there are signs the index will move and close lower.
The closing candlestick on Friday is very bearish.
There are still 4 strong selling signals in the S&P which are seen in the chart below.
On top of this the Lower Bollinger Band is now tumbling lower and the 50 day moving average is almost ready to cross below the 200 day moving average for a 5th major sell signal.
There are no bullish signals in the S&P chart as of Friday Dec 7.
Stock Market Outlook review of For Dec 7 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wed Nov 28 2018. The up signal was very weak on Friday and ready to turn to a down signal. We should see that happen on Monday by the close.
- 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 falling.
- 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 strong 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 nearing oversold.
- 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 Resistance Levels To Be Aware Of:
2900 was good support – this will be strong resistance
2860 was good support – this will be resistance
2830 was light support and will be light resistance
2795 is light resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is resistance
2675 is light resistance
2650 is light support
2620 is light support
2600 is strong support and held the market up from the lowest pullback in the present correction.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Mon Dec 10 2018
Monday is set to see further losses. While emotions are running high among investors, there is always the possibility of a bounce, but it won’t hold even if it does occur. At present there are no signals strong enough to create any kind of meaningful bounce.
The technical indicators are strongly negative. Monday will see a further decline of equity and more deterioration of stocks. Caution is definitely warranted for Monday as the outlook is still lower.
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