On Friday the index slipped at the open, fell to 4600 and then bounced back to 4666 for a huge 66 point jump. This was just a bounce however as selling continued and the index ended the down at 4620 for a drop of 48 points or 1%.
The NASDAQ however had a better day. It closed down just 10 points and spent much of the day positive.
The market is facing growing concerns that the omicron variant could derail or delay what is usually a robust period of Christmas holiday buying. If lockdowns occur or outings face smaller gatherings such as at restaurants, movie theatres and even malls, investors worry it will turn nasty for many companies. A good bellwether at present is the XRT – SPDR® S&P Retail ETF. Just November 17th this ETF was at $104.31 and analysts were calling for a breakout. Instead the ETF dipped lower and on Friday Dec 17, it was down 15.6% from its 52 week high. I have a couple of trades on the XRT at present and am monitoring this ETF for a bounce. If we see the XRT ETF begin a recovery, we will see the SPX also climb back.
Let’s review the technical indicators at the close on Friday Dec 17 2021 to see what to expect for Monday. This is a shortened week of trading with markets closed on Friday Dec 24, for the Christmas holiday season. Since 1974 indexes have been higher for the week before Christmas for a staggering 88% of the time. However none of those years witnessed a pandemic and the jury is out on whether the pandemic will steal the traditional December rally.
Stock Market Outlook Chart Comments At The Close on Fri Dec 17 2021
The closing candlestick on Friday is bearish. You can also see that the index in the morning, slipped to the 50 day moving average which sparked the late morning rally.
The futures, early on Monday morning show a good chance the index will open at or below that 50 day support level.
Friday also marked the first close below the 21 day moving average since Tuesday December 14.
Friday’s close turned the Upper Bollinger Band lower which is a bit concerning. However the Lower Bollinger Band is still falling and should move below the 100 day moving average Monday or Tuesday which is bullish.
The 21 day moving average is once again falling while the remaining 50, 100 and 200 day moving average are still climbing. This is partially bearish for Monday.
For the start of the week, the index is more bearish than bullish which could spell some trouble to start the week.
Stock Market Outlook review of Fri Dec 17 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a confirmed up signal on Wed Dec 15 2021 . On Friday, MACD reversed course and issued an unconfirmed down signal just 3 days after issuing a confirmed up signal.
- 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.
- 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.
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:
4725 is resistance
4700 is resistance
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Mon Dec 20 2021
For Monday, the technical indicators are pointing lower for the index to start the week. The unconfirmed down signal from the MACD technical tool was disappointing to see on Friday at the close.
For Monday there are no indicators pointing to the potential for a bounce which often means, we may see a bounce occur simply because sentiment has turned quite negative, once again.
Watch for the potential for a bounce on Monday, but take profits in it as the index is showing the potential for the index to slip lower, at least for the start of the week.
Stock Market Outlook Archives
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