Friday saw stocks slip down and retest once again the 3000 level but then rallied in the final hour and close up 14 points at 3044. The index has spent most of last week trading between 3000 and 3050.
Events over the weekend with the demonstrations, looting and rioting has keep a lid on the futures for Monday however overall the indexes are continuing to hold their gains from last week. Let’s look at Friday’s technical picture to see what it can tell us about the start of June.
Stock Market Outlook Chart Comments At The Close on Fri May 29 2020
The SPX chart continues to be bearish with 6 sell signals in the chart.
Bullish signs however, continue to grow. There was an up signal on May 1 when the 21 day moved above the 50 day moving average. As well the 21 day is now at the 100 day and on Monday it should signal up. Also in the chart the 50 day is turning back up, another good sign for the bulls. The Bollinger Bands Squeeze is ending and the 50 day moving average has reached to Lower Bollinger Band, another bullish signal. The Upper Bollinger Band is rising and the index is following that rise. This is more bullishness for stocks.
The index has now been above the 200 day moving average for 5 straight days, bullish again.
The closing candlestick on Friday was bullish for Monday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling slightly but 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 Tuesday May 19. The up signal was stronger 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 signal is rising and positive as it moves into overbought signals..
- 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 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 turned lower indicating not a lot of price changes are expected.
- 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:
3050 is resistance
3000 is strong resistance
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%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Mon Jun 1 2020
Monday should start off shaky following all the political events over the weekend but investors in general remain positive on stocks.
A shaky start should find buyers. If it does, then the S&P may not dip below 3000 and will continue to try to build on Friday’s advance.
The outlook is still for a higher close on Monday but if that fails to happen it won’t change the underlying direction at present. The outlook remains higher for stocks.