Friday saw another large loss for all 3 indexes as investors continue to fret about a possibility of global growth slowing. Investors worry that any slowing in the global economy will create a recession in 2019.
The S&P had a very poor day and fell 1.9% to close at 2599, right at major support which is 2600. Throughout the present correction, any drop to 2600 was followed by a large bounce and rally attempt. Let’s see what Friday’s closing numbers can tell us about Monday’s outlook and whether we can expect, once again, another bounce.
Stock Market Outlook Chart Comments At The Close on Fri Dec 14 2018
The S&P chart remains bearish and a 5th sell signal occurred Dec 12 with the 50 day falling below the 100 day.
On Friday, all the sell signals gathered more strength.
All the major averages are still falling and the Bollinger Bands, both the Upper and Lower, are falling which further supports an outlook for more selling.
The closing candlestick is also bearish for Monday.
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 a down signal on Mon Dec 10 2018. That signal was stronger on Friday.
- 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 moving sideways.
- 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 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 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 also 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 resistance
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 17 2018
There are no positive signals from the technical indicators for the start of the week.
Everything currently supports a move lower. There are though, signs of the index being oversold which could assist in a bounce attempt. However, at this time, any bounce attempt will not hold.
Monday will end with stocks lower.
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