Friday saw a second day of gains which left the S&P at the 21 day moving average. Following two major reversal days, normally investors should expect to see some weakness creep into the rally. Let’s review Friday’s close to see what to expect for the start of the third week of May.
Stock Market Outlook Chart Comments At The Close on Fri May 14 2021
The Bollinger Bands are continuing to widen which is a bullish sign.
The closing candlestick points to Friday’s close as being a bounce and bullish but normally followed by a day or two of weakness.
The index is back above the 50 day moving average and the Lower Bollinger Band which should pressure the Lower Bollinger Band to fall further. Meanwhile the 21 day moving average has dipped but the 50, 100 and 200 day are still climbing.
The chart has turned back bullish with just the closing candlestick on Friday offering a warning of weakness to start off the third week of May.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and rising.
- 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 April 30 2021. On Friday the down signal was still quite strong but weaker than Thursday.
- 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 to start the day on Monday.
- 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 to start off the week.
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 rose further on Friday.
- 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 rose slightly which indicates prices are not expect to see a lot of change for the start of the week.
- 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:
4250 is resistance
4225 is resistance
4200 is resistance
4150 is light support
4100 is light support
4070 is very light support
4050 is light support and where the 50 day is currently residing. This would represent a 4.4% decline.
4000 is good support
3900 is support and just below the 100 day moving average.
3850 is support
3800 is support
3750 is good support
3700 is light support and just below the 200 day moving average.
3680 is light support
3600 is strong support
Stock Market Outlook for Tomorrow – Mon May 17 2021
For Monday, the S&P begins the third week of May with some weakness but the technical indicators while pointing to weakness, are also indicating that no new sell-off is expected following the decline last week.
Instead Monday looks like a choppy and sideways day that will see a push to move higher but probably a flat to slightly lower close. Tuesday may prove the same but we will have a better idea after we see Monday’s dips.
Dips on Monday should be opportunities to setup trades.