On Friday stocks continued the advance but while the climb remains broad-based volumes are dropping. With the Fed’s interest rate decision due on Wednesday, many investors are waiting for the Fed before deciding whether to trust the present rally. The S&P closed up 10 points on Friday but for the week it was up 98 points. The NASDAQ ended Friday up 109 points and for the week it was up an impressive 481 points. Both indexes have brought in an impressive record breaking January return to date. Volume on the NASDAQ was the highest in weeks at 6.5 billion shares traded as investors seem intent to jump into what many believe are low valuation tech stock names. Intel stock, which fell 6.4% saw an amazing 148 million shares traded. Average day’s volume is usually around 37 million.
As well on Friday, a new up signal was generated by the 21 day moving above the 100 day moving average. More on that is below.
Let’s review the closing technical indicators from the SPX on Fri Jan 27 to see what to expect for Mon Jan 30.
Stock Market Outlook Chart Comments At The Close on Fri Jan 27 2023
On Fri Jan 27 2023 the S&P traded the entire day above the 200 day moving average once again. This is bullish.
The closing candlestick however is signaling the index is overbought and will pullback. While the is bearish the overall outlook remains bullish as often overbought stocks with strong up momentum can keep pushing for several days before actually dipping back. With the Fed’s interest rate decision due on Wednesday, we could see the index still move somewhat higher on Monday and Tuesday, ahead of that decision.
The Upper Bollinger Band is continuing to rise which is bullish. The Lower Bollinger Band is also rising which is bullish.
The 200 day moving average is starting to rise which is bullish. All the major averages are now rising.
The 21 day moving average moved above the 100 day for a second up signal. This ends the most previous down signal from Jan 4.
At present there are are 4 down signals in place since April 24 as the Jan 4 down signal is gone as on Monday, and two up signals. We could see a third up signal this week if the 21 day continues to climb. It will cross above the 50 day.
The chart is 60% bullish for Monday which is better than Friday’s outlook..
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling 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 Monday Jan 9. The up signal gained 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 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 neutral signal in place and is also 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 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 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:
4050 is resistance
4030 is resistance
4025 is resistance
4000 is resistance
3975 is light support
3965 is light support
3950 is light support
3930 is light support
3900 is light 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
3730 is light support
3725 is light support
3715 is light support
3700 is good support
Stock Market Outlook for Tomorrow – Mon Jan 30 2023
The Rate Of Change is rising sharply and is nearing the strength of levels last seen in early November. The Slow Stochastic has turned neutral to start the week and the Ultimate Oscillator is falling back. Both are signaling the best part of the rally is over for the present. It may not start again until after the Fed’s interest rate decision is known on Wednesday of this week. If the Fed increases by a quarter point, expect stocks to bounce. If the Fed indicates a pausing of interest rate hikes, again, expect a bounce. If the Fed remains hawkish and raises a half point expect weakness at first.
For Monday the technical indicators, including the closing candlestick from Friday, are all pointing to the day being weak with dips likely and a possible lower close although the closing candlestick points to a probable higher close Monday.
Market breadth indicators are supportive of the bulls and stocks moving higher. This is a busy week for reports and for earnings. All of this could impact stocks this week but the overall direction higher is intact to start off Monday.
Potential Economic and Political Market Moving Events
There are a number of reports this week that will impact stocks including the Fed’s interest rate announcement on Wednesday and January’s non-farm payroll numbers due out Friday.
Monday:
For today there are no economic reports that will swing stocks. Tuesday we get consumer confidence index, Case-Schiller home price index and Chicago business barometer.
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