Friday saw the S&P end the week with another 15 points tacked on to the index for a new closing high and a new intraday high. The index reached 3894 intraday and closed at 3886, both records.
It was the end to one of the best weeks in months and stood in sharp contrast to the last week of January which many analysts called the start of a major correction. Instead talk of further stimulus turned around the selling and moved market indexes to new all-time highs. The new high pushed the Moving Average Convergence / Divergence (MACD) technical tool to issue a new up signal which is unconfirmed but will probably see a confirmation on Monday.
Stock Market Outlook Chart Comments At The Close on Fri Feb 5 2021
The S&P moved higher again on Friday and closed at the Upper Bollinger Band. The close left behind what is often referred to as a spinning top candlestick. This signals the market on Monday could move either way, up or down but a large move either way, is not expected.
The 21 day moving average is rising and is above the 3800 valuation. The Upper Bollinger Band is turning higher which is bullish. The Lower Bollinger Band is following the 50 day moving average closely. Normally with the 50 day moving higher it is advising that the up move is narrow. It does not mean the up move will fail, but it is advising caution. As long as the 21 day keeps climbing the market will also stay out of trouble. There is a good chance this week we could see the Lower Bollinger Band cross above the 50 day. If that happens normally we can expect a choppier market with bigger dips. A move lower for the Lower Bollinger Band is more bullish.
The 200, 100 and 50 day moving averages are still climbing with the 100 day moving average now above the 3600 valuation and the important 200 day moving average at 3450. These are strong indicators the market will continue to push to new highs this week.
Monday looks sideways but bullish with a higher close.
Stock Market Outlook review of Fri Feb 5 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wed Jan 27 2021. On Friday the down signal was replaced with an unconfirmed up 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 rising and nearing overbought readings but not there yet.
- 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 an up signal for Monday and is also into overbought readings but with plenty of room to move higher.
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 starting into overbought readings.
- 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 moving sideways unchanged from Thursday which indicates big moves up or down are not expected for Monday.
- 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:
3900 is expected resistance but has not been tested yet.
3850 is support
3800 is support. The 21 day moving average is just above 3800 at present.
3750 is support and where the 50 day moving average is at present.
3700 is light support
3600 is strong support and where the 100 day moving average is at present
3550 is support
3500 is strong support
3450 is support and where the 200 day moving average is at present
Stock Market Outlook for Tomorrow – Mon Feb 8 2021
For Monday the technical indicators are still bullish. MACD has issued an unconfirmed up signal to start the week.
The January unemployment report was disappointing as it shows a growing number of people back in the non-participating sector as the lock-downs in various states impact their ability to either work or look for work. However for many investors and analysts the numbers were not really dwelt upon as the focus quickly shifted on Friday to stimulus. With a huge stimulus package more likely than ever to hit the economy analysts believe the employment numbers will improve. It also means the indexes will move higher for much of this week in anticipation of what a stimulus package this size means for the economy.
For Monday the S&P will challenge the 3900 level which is just 14 points away. The index has a good chance to see 4000 this month although it never is a straight line up. There will be dips, some deeper than others but the keys to watch are the 50 and 100 day moving averages. As long as they are climbing, all dips are opportunities for further trades. The Rate Of Change is advising that big swings up or down should not be expected on Monday. Overall the market remains bullish to start the second week of February.
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