Friday saw stocks open the day lower, struggle back and then tumble again around 11:00 AM. But the SPX refused to fall even as low as 2810 and that signal brought in buyers. Investors twice pushed the index to 2860 in the mid-afternoon and when there was limited selling, buyers pushed harder into the close. The S&P ended the day up only 11 points but the day actually saw the index climb from a low of 2817 to a high of 2865 for a swing of 48 points, impressive on the back of Thursday’s gains that saw the index climb from a morning open low of 2771 to 2852 for another intraday gain of 81 points. Both were impressive rallies. Let’s view Friday’s technical indicators to see where next week may start.
Stock Market Outlook Chart Comments At The Close on Thu May 14 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and a Bollinger Bands Squeeze that is still underway. There is one up signal from May 1 with the 21 day moving average, back above the 50 day. Since moving above the 50 day the 21 day has turned sideways and given no further up signals.
Friday’s closing candlestick was bullish for Monday. The index closed below the 200, 100 and 21 day moving averages but it closed inside the Bollinger Bands Squeeze which is still bullish.
The 200 day moving average is still leading the market, which is typical in a bear market. It is still followed closely by the 100 day. The 100 day is continuing to not fall further but is trending sideways with the 200 day. Normally this is somewhat bullish. The 50 day is continuing to fall which is bearish.
The Bollinger Bands Squeeze is still underway and is showing signs the index may move lower out of the squeeze. The Lower Bollinger Band is above the 50 day and the Upper Bollinger Band is at the 200 day, both of which are normally bullish in a rally. While the chart is still bearish there are growing signs that the lows of March may not be revisited unless a new catalyst to the downside should appear.
Stock Market Outlook review of Fri May 15 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and back slightly positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an unconfirmed down signal on Wed May 13 2020. The down signal was confirmed on Thursday and 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.
- 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 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 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.
- 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 strong resistance
2950 is resistance
2900 is resistance
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 May 18 2020
While the S&P chart is still bearish the technical indicators are mixed after Friday’s close. Perhaps most important is the down signal from MACD is gaining strength to the downside despite the S&P climbing again on Friday. The only other technical indicator that is bearish is the Slow Stochastic which still has a down signal for Monday. However that signal is very weak and could turn into an up signal during the day on Monday, if the S&P rises intraday in the morning.
Out of the 6 technical indicators, 4 are pointing to the index as still able to rise further. With signals mixed after Thursday and Friday’s advances, investors should expect another choppy day of trading on Monday and dips are likely, but the bias is still for a higher close to start the week.
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