For the first time since the last week of November, the S&P closed the week positive, albeit from a rather tumultuous week that saw the worst Christmas Eve on record and then the biggest one day rally for Boxing Day in history. By Friday the Index closed sideways with just a slight loss.
Stock Market Outlook Chart Comments At The Close on Fri Dec 28 2018
The S&P chart remains very bearish with 6 sell signals. On Boxing Day the 100 day moving average fell below the 200 day. The 200 day is now leading the markets. This created an extremely oversold condition which resulted in much of the rally. By Friday a lot of the oversold condition was worked out. Now we get to see if the index can move higher “on its own”.
The Lower Bollinger Band is still falling and the Upper Bollinger Band is turning lower, both bearish signals.
The closing candlestick on Friday was bearish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and not rising, which is never a good sign. It is moving sideways as the market tries to decide whether to rally further.
- 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 down signal was weaker 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 after a short burst higher. This is another signal of indecision.
- 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 is signaling up.
- 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 sideways.
- 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 support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong 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 resistance
2600 is strong resistance.
There was good support at the 2550 level from where the market originally bounced. Despite falling 200 points lower to the 2350 level, the 2550 level still has support for the market if it can recover this high by this week, otherwise it will become resistance as investors will want out of their positions should the market have trouble climbing.
The S&P has light support at 2480, right near where it closed on Friday.
It also has light support at 2450 and good support at 2425. Below that there is some support at 2400 and 2380.
Better support is at 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 31 2018
There is only one positive technical signal. That is the up signal from the Slow Stochastic.
Therefore technically the market is advising investors that the rally could be rather short-lived and the bear market may continue.
Despite this, there are signs that investors are back, picking their way through stocks and searching for bargains. There is a good chance the index will close higher on Monday, the last day of 2018.
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