On Thursday afternoon the WHO announced they saw no need for travel and trade restrictions. This caused the indexes to climb. However on Friday with more countries putting in place restrictions, rumors that the Chinese government was not telling “the whole story” on the number of people infected with the coronavirus and with airlines halting further air travel to China, the index turned back down. There was no reprieve during the day as all three indexes had their worst days in half a year. The S&P lost 1.7% for a drop of 58 points to close at $3225. Intraday it got down to 3214. The close left the indexes oversold but the potential for a bounce to turn around the selling may not come until there is something positive about the coronavirus.
Stock Market Outlook Chart Comments At The Close on Fri Jan 31 2020
The SPX chart stayed bearish on Friday. The index reached the 50 day moving average on Friday and normally we should expect a bounce attempt off that average.
The closing candlestick is bearish for Monday and is sitting just above the 50 day moving average and the Lower Bollinger Band.
The Upper Bollinger Band is falling and we could see a Bollinger Bands Squeeze this week..
The major moving averages are losing momentum and the 50 and 21 day moving averages are turning lower.
There are four support levels in place. These are light support at 3200 which may get tested as early as Monday, 3100 which is a full 100 points lower, 3075 which is light support and 3000 which is major support.
For Monday the chart is quite bearish following Friday’s large sell-off. At present the index looks set to fall to the 100 day moving average.
Stock Market Outlook review of Fri Jan 31
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling. It is signaling oversold following Friday’s plunge.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Jan 24. At the close on Friday the sell signal was very strong.
- 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 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 for Monday..
- 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 and just starting to signal oversold.
- 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 also falling and it too is signaling oversold.
- 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:
3325 is resistance
3200 is light support
3100 is light support
3075 is light support
3030 is very light support
3000 is good support and if the S&P fell this low it would mark a normal correction in a bull market
2960 is light support
2900 is light support
2860 is light support
2840 is good support
2800 is strong support
Stock Market Outlook for Tomorrow – Mon Feb 3 2020
For Monday the technical indicators are all pointing lower for the index. There are no up signals for Monday.
Without any positive news on the coronavirus we should expect the index to try a small rally and then end the day still lower.
News this weekend, that Apple plans to close their China outlets for two weeks, will also put pressure on stocks on Monday.
Positive news is needed to rescue stocks from falling further but that news is not expected to play out on Monday.
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