Friday saw selling continue as investors tested the 3200 valuation. A late morning dip ended up being the lowest point for the day but the close was just 15 points above 3200, at 3215. Let’s review Friday’s closing technical indicators to get a clue on what Monday may bring.
Stock Market Outlook Chart Comments At The Close on Fri Jul 24 2020
The index closed above the 21 day moving average again on Friday and above 3200 but closed below the Upper Bollinger Band leaving behind a bearish candlestick for Monday.
As well you can see in the chart that the Upper Bollinger Band has turned sideways and is no longer climbing. Meanwhile the Lower Bollinger Band is rising again. If we get a couple more down days we could see another Bollinger Bands Squeeze form up.
There are now 6 up signals and no down signals in the chart.
The 21 and 50 day moving averages are climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day but you can clearly see the Lower Bollinger Band is moving back toward the 100 day.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market. They are signs on Friday that we could see a downturn this week.
Stock Market Outlook review Fri July 24 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling further on Friday.
- 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 almost gone on Friday. We could see an unconfirmed down signal on Monday if we get a negative close.
- 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.
- 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 down signal in place and is 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 sharply.
- 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 indicating that prices will see a change shortly. This could be a further drop in prices or a rally back up.
- 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:
3275 is resistance
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 Jul 27 2020
For Mon Jul 27 2020, the index technical indicators are all pointing to a lower start for the week but with the chance of a bounce first and then more selling.
The MACD up signal is almost gone. If Monday ends negative, we could see a sell signal from MACD.
The rate of change measures the expected change in the market, either up or down. As of Friday’s close it points to a change in prices. At present this looks to be negative.
Monday will see a potential bounce but a lower close.
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