Stock Market Outlook for Mon Feb 14 2022 – Cautious and Lower

Friday saw no real bounce in the morning but stocks held the 4500 support level until late morning. Then stocks drifted lower through the lunch hour until news hit the markets that indicated Russia would invade Ukraine probably by Wednesday of this week.  Stocks fell rapidly and sell volume picked up as the index fell lower. It closed at the 200 day moving average, 4419, down 85 points for a loss of 1.9%.

The NASDAQ fell 394 points to end the day at 13,791, down 2.7% on large volume.

With war now appearing likely markets will probably have a touch week ahead for the third week of February.

Let’s review Friday’s closing numbers to learn what investors should expect for Monday Feb 14.

Stock Market Outlook Chart Comments At The Close on Fri Feb 11 2022 

The closing candlestick on Friday is bearish. The day saw the index collapse through the 21 day moving average early in the day and by the close end up at the 200 day moving average. This is bearish.

The 21 day moving average is back falling.

The Upper Bollinger Band is still falling sharply which is quite bearish and you can see the Lower Bollinger Band is rising. The original outlook for this Bollinger Bands Squeeze was to send the index to 4400. But the index ended Friday at 4418 which means the Bollinger Bands Squeeze will be sending the index lower. A move down to 4200 on the S&P this week, if war erupts is a possibility based on the Bollinger Bands Squeeze that appears ready to form up later this week.

The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is back rising which is bullish.

The chart has two down signals in place and the index could generate a third down signal later this week. The chart is very bearish.

Stock Market Outlook review of Fri Feb 11 2022

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and just turned negative.

• 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 Friday Feb 4. On Friday the up signal lost half of its strength. The MACD histogram is trending lower.

• 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 negative and 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 and plenty of room to fall. 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 falling sharply for a second day. This 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 for a second day indicating lower prices are ahead.

• 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:

4800 is resistance

4725 is resistance

4700 is resistance

4670 is resistance

4655 is resistance

4600 is resistance

4550 is light support

4525 is light support

4500 is good support

4490 is light support

4475 is light support

4450 is medium support

4400 is good support and the 200 day moving average

4370 is light support

4350 is light support

4300 is good support

4290 is light support

4270 is light support

4250 is good support

4225 is light support

4200 is good support

 Stock Market Outlook for Tomorrow – Mon Feb 14 2022 

As expressed in the Stock Market Outlook for the past two weeks, an invasion of Ukraine by Russia would be a catalyst for stocks to move lower. This event, combined with worries over the prospects of rising interest rates will be enough to push stocks lower for what now appears to be most of the week.

As indicated in Friday’s stock market outlook I purchased SPY put options in the Market Direction Portfolio early morning and will be holding them through Monday. It will take news of Russia backing away from an invasion to bounce stocks. With that appearing to be unlikely, the week will be poor for stocks. I will be adding in more SPY put options on Monday morning to Friday’s position. Other ideas for Monday will be in the morning Investing Strategy Notes for Monday Feb 14.

For Monday expect a down day and stay cautious for the week as the index looks positioned to fall further, thanks to Russia’s probable invasion. If there is a bounce on Monday which would be unlikely, I will be buying more SPY put options to hold for much of this week.

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