Friday saw investors digest much higher than expected jobs numbers on the back of disappointing earnings from Apple, Alphabet and Google. Normally investors could have expected to see the SPX fall much further but instead the index lost 1%, falling 43 points and closing at 4136. The NASDAQ lost 193 points closing down at 12,006. For the week though both indexes had strong performances.
With another week of earnings ahead and Fed Chair Powell speaking on Tuesday, we could see another volatile week.
Let’s review the closing technical indicators from the SPX on Fri Feb 3 to see what to expect for Mon Feb 6.
Stock Market Outlook Chart Comments At The Close on Fri Feb 3 2023
On Fri Feb 3 the S&P traded lower but above the 200 day moving average.
The closing candlestick is bullish for Monday and signals the market may open lower and try to bounce.
The Upper Bollinger Band is rising rapidly which is bullish. The Lower Bollinger Band is also rising which is also bullish.
The 200 day moving average is rising which is bullish. All the major averages are now rising.
The 21 day moving average is above the 200 day with a new up signal for the start of the week. This wipes out the down signal from Sep 13.
At present there are 2 down signals in place since April 24 and 4 up signals since Jan 13.
The chart is 70% bullish for Monday abut is still showing the index as overbought.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling but positive. It is no longer signaling overbought.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday Jan 9. The up signal lost some strength on Friday as did the histogram.
- 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 and just below overbought readings.
- 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 weak up signal in place 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 falling and leaving overbought signals.
- 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 and positive.
- 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:
4250 is resistance
4220 is resistance
4200 is resistance
4180 is resistance
4150 is resistance
4125 is resistance
4100 is resistance
4090 is resistance
4075 is resistance
4050 is resistance
4030 is light support
4025 is light support
4000 is light support
3975 is light support
3965 is light support
3950 is good support
3930 is light support
3900 is good support
3875 is light support
3850 is good support
3830 is good support
3810 is light support
3800 is good support
3775 is good support
3750 is good support
Stock Market Outlook for Tomorrow – Mon Feb 6 2023
Comment: Note in the support and resistance levels in the section above, how quickly the rally has pushed through 4000 and 4100. The support levels are well below where the index is currently trading. The index needs more time to be able to build support. A dip back for the SPX could be fairly sharp and probably down to at least 4100 if not 4050. This is not to say the market is set to fall back. This is just an observation based on years of trading and knowing what can happen to a market that lacks proper support levels.
Friday’s pullback reduced some of the overbought signals, but the index is still ahead of itself.
Monday will open lower as investors wonder about fallout from the Chinese “SPY balloon” episode along with worries about Fed Chair Powell’s comments on Tuesday and what they may contain. Despite this I am using dips as opportunities for setting up trades. The close could surprise with a higher end to the day.
Potential Economic and Political Market Moving Events
The next major event is Fed Chair Powell’s speech on Tuesday at 12:40.
No events of any significance.
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