Fri Jul 17 2020 saw stocks test the 3200 level within the first hour of opening but it was on light volume. That emboldened investors who moved back into stocks and pushed the index higher, finally breaking above 3230 in the last half hour of trading.
The S&P closed the day just below at 3224.73. The index is now just 168 points away from the 52 week high of 3393.
Let’s look at Friday’s closing technical indicators to see what the start of next week may look like.
Stock Market Outlook Chart Comments At The Close on Fri Jul 17 2020
The index closed above the 21 day moving average again on Friday marking the 11th straight day of a close above this important technical indicator. It also closed above the 3200 level for the third straight day and also closed at the Upper Bollinger Band which itself, is continuing to rise. All of this is bullish.
The trading action on Friday was choppy but with a bias to the upside. This left behind a neutral candlestick to start the week.
The Lower Bollinger Band is slowly dipping which could signal the end of the Bollinger Bands Squeeze.
There are now 6 up signals and no down signals in the chart.
The 50 day moving average is climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day. The 21 day though is turning down as of Thursday and again on Friday despite the index climbing higher. This could be signaling that Monday may have some weakness.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market.
Stock Market Outlook review of Fri Jul 17 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is still falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday July 8. That up signal was stronger again on Friday.
- 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 dipping lower, slightly.
- 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 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 rising.
- 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 rising.
- 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:
3200 is still resistance
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2500 was good support and marked a correction of 26.3%
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a 41% correction from the all-time high. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Mon July 20 2020
For Monday July 20, the index is facing a mixed technical outlook. The bias is still to the upside but there will continue to be pressure to the downside from sellers. The technical indicators are showing some weakness as seen in momentum and in the Ultimate Oscillator, but MACD and the Slow Stochastic are pointing higher. The Rate Of Change and Relative Strength Index (RSI) are both climbing, but only slightly. The neutral candlestick at the close of trading is definitely indicative of what the technical indicators are advising as the index continues to try to climb further on Monday against a backdrop of sellers and nervous investors.
Over the weekend, unless there is “bad news” on Covid-19, the outlook is still for a higher close. Bulls should not expect a strong showing higher on Monday and dips, especially in the morning could take the index back to 3210, but the end of the day should continue to show the up bias is still in place.
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