Stock Market Outlook for Mon Jan 11 2021 – Mixed Outlook With A Bullish Bias

Friday saw stocks continue their advance with the S&P making another new all-time high and closing just below it at 3824 for a 20 point gain. This capped off a week that had started with the media bringing out the bears on Monday and by Friday the bears were back in hibernation. It was the best week since the fourth week of November which saw an 80 point gain. On Thursday the Moving Average Convergence / Divergence technical indicator had issued an unconfirmed up signal. On Friday that signal was confirmed despite disappointing December jobs numbers.

Stock Market Outlook Chart Comments At The Close on Fri Jan 8 2021

On Fridayy the index closed above the Upper Bollinger Band for a second day but left behind a bearish candlestick for the start of the week. This is not unusual considering the move the index has made.

The Bollinger Bands Squeeze is ending as you can see in the chart below, with both upper and lower bands separating. At present the outlook is for the index to move higher, according to the move out of the Bollinger Bands Squeeze.

The major moving averages are still rising and the up signal from Oct 21 is still in play.

Stock Market Outlook review of Fri Jan 8 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 an up signal on Dec 7. On Friday the up signal was confirmed.

• 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.

• 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 in place and in once again 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 is also 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 trending sideways which indicates that a large move up or down is not expected at present.

• 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:

3800 is resistance

3750 is resistance

3700 is light support

3600 is strong support

3550 is support

3500 is strong support

3450 is support

3400 is support

3375 is support

3300 is strong support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is strong support

 Stock Market Outlook for Tomorrow – Mon Jan 11 2021 

For Monday the 3800 level is still resistance. The index will more than likely test 3800 again and could once more dip below it. However the signals are decidedly bullish so on Monday, weakness is probably more due to the politics of another potential impeachment than any economic outlook. As well, the index is overbought and we get bank earnings starting this week. If earnings are better than expected, the overall market will gain traction and push higher.

For Monday then, some weakness should be expected but there is as much the potential for a higher close as there is for a lower close. The outlook then is mixed but with a bullish bias intact, for the start of the second week of the new year.

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