Friday March 5 was another dramatic day on the markets. The opening February non-farm payroll numbers showed excellent job growth and initially investors seemed to feel this was negative. The S&P spent the morning falling deeper until by 11:28 it was down to 3730 just 7 points above Thursday’s low. This placed the S&P just above the 100 day moving average. That seemed to be deep enough to bring in buyers. The market rose for the remainder of the day ending near the high of the day at 3841 for a rally of 111 points from the morning low to the close. The S&P closed up 73 points at 3841 and back above the 50 day moving average. But did the rally on Friday change the trajectory of the market or was this just another bounce? Let’s look at Friday’s closing technical indicators on the SPX to see what is predicted for the start of the second week of March.
Stock Market Outlook Chart Comments At The Close on Fri March 5 2021
The Bollinger Bands Squeeze had started to widen mid-week last week. That ended on Thursday though and the Bollinger Bands Squeeze is back continuing to pressure the index. The closing candlestick on Friday was bullish for the start of the week.
The index closed above the 50 day but below the 21 day. Both the 50 and 21 day moving averages are starting to turn lower.
In my comments on Thursday night for Friday’s market I indicated that if there was a strong rebound on Friday many investors who went short over the past 3 days of selling, will cover which will drive the index higher than usual. That often leads to some selling on the next trading day, which in this case would be Monday. Therefore on Monday we should be watching for dips that could be deeper than expected. A deep even as low as 3800 would not be unusual after Friday’s massive rally.
The 100 and 200 day moving averages are all climbing higher.
While the chart does show the SPX is facing some trouble, the index still has not broken below the lows of Jan 29 and Feb 1. In other words, so far this is a normal correction in an ongoing bull market.
Stock Market Outlook review of Fri Mar 5 21
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising but still 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 weakened slightly but it does not show any signs that the rally will last.
- 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 rising for a second straight day.
- 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 still has a down signal in place. It is nearing oversold readings.
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 spiking higher.
- 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:
4000 is resistance
3900 is resistance
3850 that was support is now light resistance.
3800 is support – was broken through finally today but is still not resistance.
3750 is support and held the market up today.
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 8 2021
For Monday the technical indicators are somewhat split. The MACD and Slow Stochastic indicators are still signaling down for the SPX. Momentum is rising but still negative. The remaining three technical indicators are all rising. This gives us a split outlook for Monday which means we should expect dips that could be deep and could reach 3800 but we should also expect another push to try to reach above 3850 at the very least.
For Monday we have a mixed outlook with a bias up by the end of the day.
Stock Market Outlook Archives
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Stock Market Outlook for Thu Apr 11 2024 – Weakness and Lower
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