I had expected a slightly lower close on Friday Feb 22 by a few points, but enthusiasm for the a potential China trade deal continued to push stocks higher. As the index climbs into stronger resistance and fails to sell-off, more investors are returning to stocks which is bolstering the index further.
Stock Market Outlook Chart Comments At The Close on Fri Feb 22 2019
Quite a few new signals appeared on Friday in the S&P. The index is still heavily overbought but the 50 day on Friday moved above the Lower Bollinger Band and the 100 day finally move higher and could move above the 200 day during the final week of February.
There are now 3 up signals in place.
The S&P is still bearish with 6 sell signals but more positive signals are continuing to emerge.
The index closed above the 200 day moving average for the ninth day in a row and the closing candlestick on Friday is bullish for Monday.
The Lower Bollinger Band and the Upper Bollinger Band are still climbing indicating there is more upside ahead for the S&P.
The 2600 level has anchored the rally since January 14. The 2700 level has been held for the entire month of February. Both of these are bullish signs.
Stock Market Outlook review of Feb 22 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising.
- 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 weak again on Friday but still pointing up for the market.
- 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 rising and overbought.
- 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 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 rising and signaling overbought.
- 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 rising indicating prices should rise further.
- 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 support
2725 is light support
2700 is light support
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 25 2019
We will see some dips Monday but the close should still be higher.
The market is extremely overbought but at present dips are being bought as investors struggle to get into the rally.
The technical indicators are continuing to point higher for the rally but with the index approaching 2800 it will be a choppy day on Monday.
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