Friday saw stocks fall to a new lower valuation at 2681.83 for the past 3 days of selling. Normally this would signal that the 2650 level is about to be tested. However, news that the March 1 trade meeting with China might be “back on”, saw investors jump back in and snatch up stocks that earlier in the day were lower. By the close the S&P was back above 2700 and closed up 1.83 points for the day and managed to squeak out a positive week, although just slightly.
Stock Market Outlook Chart Comments At The Close on Fri Feb 8 2019
The S&P is still bearish with 6 sell signals.
There is still 1 up signal as of Jan 31 when the 21 day rose above the 50 day. The 21 day is continuing to advance and as long as the index doesn’t dip back below 2650, the 21 day should cross above the 100 day and then 200 day probably by the end of the week. Remember, any positive news on trade with China will shoot stocks higher.
The 200 and 100 day moving averages are not changing and both are continuing to slowly fall. The 50 day is slowly rising.
On Friday, the index slipped below the 200 day but closed above it. The candlestick is bullish for Monday.
The Lower Bollinger Band and the Upper Bollinger Band are turning higher indicating there is more upside ahead for the S&P.
The chart is still predominantly bearish which is why caution is still worth observing.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling. This is bearish.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Jan 4 2019. That up signal was a lot weaker on Friday, which is bearish.
- 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 was rising on Friday.
- 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 and is still overbought. This is bearish.
- 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 turning sideways which is bearish.
- 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 indicating more weakness should be expected. This is bearish.
- 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 still resistance
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is 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 full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Mon Feb 11 2019
The technical indicators are predominantly still bearish. The Slow Stochastic has issued a sell or down signal for Monday and MACD is rapidly losing the buy signal which is also bearish.
Remember too that stocks are as much about emotion as they are about technicals and fundamentals. Right now investors are emotionally charged with worry which is keeping the bias to the downside. If there is any positive news, it will pump investors back to buying stocks and push them higher.
For now though, the index looks weaker for Monday but a drop below 2650 is still not expected. For Monday then, I am going to say look for a sideways pattern but with a bias lower for stocks. A negative close is still probable.
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