Stock Market Outlook for Mon Mar 1 2021 – Bounce Likely Off 50 Day Moving Average But Suspect

The 10 year Treasury on Friday eased a bit and stocks tried for a bounce. The NASDAQ closed higher and the S&P closed down although it came close to a positive finish in the final half hour of trading. The Dow Jones ended considerably lower.

Let’s look at Friday’s closing numbers and technical indicators to see what investors should expect for the start of March.

Stock Market Outlook Chart Comments At The Close on Fri Feb 26 2021

The S&P closed at 3811 a drop of just 18 points. You can see in the chart though, that the index slipped below the 50 day moving average before closing back at the 50 day. This left behind a bearish candlestick to start the month of March.

As well you can see that the Upper Bollinger Band is turning lower while the Lower Bollinger Band is rising. We could see a Bollinger Bands Squeeze by the end of the week should the market continue to trade sideways with a bias lower, this week.

The 21 day moving average is starting to fall. The 50, 100 and 200 day moving averages are still rising.

Overall the market is back to weakness but the close at the 50 day moving average usually will see a bounce attempt.

Stock Market Outlook review of Fri Feb 26 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling sharply and negative.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Mon Feb 23 2021. On Friday the down signal gained even more strength. More downside should be expected after a bounce.

• 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

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 into oversold signals.

• 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 changes will be seen in prices on Monday.

• 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:

4000 is resistance

3900 is resistance

3850 is support.

3800 is support.

3750 is support

3700 is light support

3680 is light support – The 100 day moving average is at this valuation.

3600 is strong support

3550 is support

3500 is strong support

3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.

 Stock Market Outlook for Tomorrow – Mon Mar 1 2021 

There are enough oversold stocks, especially on the NASDAQ to see investors try for a bounce on Monday. As well, the 10 years Treasury slipped further early morning on Monday and that will also help. Investors remain worried about rising rates. After last week’s selling, the 10 year Treasury will now have to move above 1.5% for investors to sell further.

Monday looks set for a bounce attempt as some sectors are oversold. At present we could expect the index to try to retake the 21 day moving average and then probably fall back again and test the 50 day once more. The Bollinger Bands Squeeze could happen starting by the end of the week. At present this would be bearish should it start this week.

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