Friday saw stocks fall lower, tumbling to 2492 just 14 points shy of Thursday’s low shortly before the lunch hour. News of a potential united front to face the coronavirus outbreak saw stocks try to rally. By 2:00 PM the index was pushing near 2600 when House Speaker Nancy Pelosi announced a wider testing for coronavirus cases but was shy on specifics. Markets began to fall again until by 2:40 they were down to 2533 when investors pulled back on their selling wondering what, if anything, the President would say at his news conference at 3:00 PM. By the time the President began his Rose Garden address by 3:35 PM, the index began to climb. By the time the market closed, it was at the day’s high, of 2711 for an incredible rally of 230 points for a 9.29% gain by the close.
On Sunday the Federal Reserve cut interest rates to zero to a quarter of a percent. This though will cause another panic by investors as they worry that this indicates “things” are worse then investors are being told. Another White House news conference Sunday afternoon did nothing to alleviate that fear and with panic hitting superstores and pharmacies Monday promises to be another wild day of panic and selling. Just who is left to sell out is hard to say but whoever there is left, will be back selling.
Stock Market Outlook Chart Comments At The Close on Fri Mar 13 2020
The SPX chart continues to be very bearish. The index closed back above the 2700 level but panic selling will easily push the index back through 2600 and possibly back down to 2500. The closing candlestick on Friday was pointing to a drop at the open as the index bounced too high on Friday by the close. With fear rising over the weekend, the index will fall further than it probably would have on Monday.
The technical indicators have largely been ignored in the decline and will continue to be so until there are signals that either a vaccine has been made available or cases slow and reverse or the government can show they have matters well in hand. None of that seems likely this week.
There are now two sell signals in the chart and a third sell signal is about to occur on Monday. This is a major sell signal as the 21 day falls below the 200 day. You can see in the chart that the 21 day is just above the 200 and ready to fall lower.
All the moving averages are moving lower with the 50 day back below 3200.
The Lower Bollinger Band is falling rapidly which is a signal for more downside this week. The closing candlestick was back inside the Lower Bollinger Band and leaves room now to the downside. Note that the Upper Bollinger Band is now turning down as well.
Stock Market Outlook review of Fri Mar 13 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising but still negative. The readings are somewhat oversold.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Feb 21. The down signal was higher but still quite strong 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 rose on Friday but the spike is lower the then prior two spikes which indicates Friday was a bounce.
- 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 weak up signal in place and is oversold.
- 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 rising but again, the spike on Friday is lower than the last two spikes which indicates Friday was a bounce.
- 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:
3000 is resistance
2960 is light resistance
2900 is light resistance
2860 is light resistance
2840 is light resistance
2800 is strong support
2745 to 2750 is light support
2725 is light support
2700 is strong support and marks a full correction of 20.4%.
2675 is light support
2650 is support
2625 is light support
2600 is resistance
2550 is light resistance
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2100 is light support
2000 is good support and marks a 41% correction.
Stock Market Outlook for Tomorrow – Mon Mar 16 2020
With no “good” news on coronavirus and citizens still hoarding toilet paper, food, hand sanitizers, the chance that markets can recover despite Friday’s big bounce is slim. The rally on Friday was a bounce from a very oversold market built on the hope that the government may be getting a better handle on the outbreak. However until there is positive news the outlook remains lower. At present technical levels are largely being ignored which means on Monday the index is setup to fall back and could retest the lows from Friday just below 2500, if the futures are any indication. At present the futures indicate the market will open down at 2555 which would trigger a “limit down” 15 minute stop.
There has been tremendous selling and many stocks are sitting at or near lows from 2012. How much more selling markets will face is difficult to determine but without any good news on coronavirus infection rates, it seems there are still enough sellers to chase buyers, who keep moving lower. Monday looks like another day of carnage.
Stock Market Outlook Archives
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Stock Market Outlook for Mon Apr 15 2024 – Expect A Bounce
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