Friday Feb 19 saw stocks attempt a bounce, as expected but it failed to gain much buying interest once the index reached 3930. The index then tumbled from 3930 at 11:30 down to 3906 by 1:09 in steady selling, losing 24 points. That broke the buyers who moved to the sidelines. The end of the day saw the S&P down 7 points to 3906, but still above 3900. Here are the technical indicators from Friday and their prediction for the start of the final week of February.
Stock Market Outlook Chart Comments At The Close on Fri Feb 19 2021
The S&P closed above the 21 day moving average and still just above the 3900 valuation. The closing candlestick is bearish for Monday. The market is continuing to try to consolidate recent gains but has slipped for 4 straight days. This is turning the technical support indicators to the downside as you can read below the chart.
The Upper Bollinger Band is continuing to rise. The Lower Bollinger Band is turning back up. For this week we need to watch to see if the Upper Bollinger Band turns lower and the Lower Bollinger Band moves back above the 50 day. Those would be sell signals.
The 21 day moving average is rising and is now at 3855. The 200, 100 and 50 day moving averages are still climbing with the 100 day moving average now at the 3660 valuation and the important 200 day moving average at 3490. These are still strong indicators the market will continue to push to new highs.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling but still positive.
- 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 Feb 5 2021. On Friday the up signal was almost gone. Any weakness on Monday and MACD will issue an unconfirmed down 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 and is still very overbought.
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:
4000 is resistance
3900 is resistance
3850 is support. The 21 day moving average is presenting here.
3800 is support.
3750 is support
3700 is light support
3600 is strong support
3550 is support
3500 is strong support
3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.
Stock Market Outlook for Tomorrow – Mon Feb 22 2021
For Monday the technical indicators are all turning lower including the up signal from MACD which will probably be gone on Monday.
At the same time, usually when all the signals turn down we can expect some kind of a bounce. Last week the selling was actually fairly muted, following a new all-time high on Feb 16. We could therefore see a bounce attempt to start the week on Monday.
However with the stimulus package in limbo, Monday looks poor with weakness building and a chance for a another lower close.