On Friday stock indexes continued their advance once again on the belief stimulus of some kind will be agreed to before month’s end. The S&P closed off the high of the day at 3477 up 30 points for a gain of 0.88%. The past week has seen the index recover the losses of the prior week and end within 111 points of the all-time high.
Stock Market Outlook Chart Comments At The Close on Fri Oct 9 2020
On Friday the index closed above both the 21 and 50 day moving averages and at the Upper Bollinger Band. The closing candlestick was bullish for Monday.
The close on Friday which took place at the Upper Bollinger Band commonly sees a dip in the early morning of the next day so watch for a bit of weakness to start the day or into early-morning trading on Monday.
The Upper Bollinger Band is still turning higher and the Lower Bollinger Band is falling lower, which is bullish.
The 200, 100 and 50 day moving averages are climbing.
The 21 day moving average is also turning higher. If it crosses above the 50 day this week, it will be very bullish heading into the end of October.
There are still 6 up signals and 3 down signals. The SPX chart is continues to gain a stronger bullish stance
Stock market review of Fri Oct 9 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Oct 1. On Friday the up signal was stronger.
- 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.
- 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 and is very overbought.
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 into overbought readings.
- 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 further upside in prices is probable.
- 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:
3600 is resistance
3500 is resistance
3450 is resistance
3400 is support
3375 is support
3300 is support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
Stock Market Outlook for Tomorrow – Mon Oct 12 2020
For Monday, the 3400 level has once again become support as of Friday’s close. The SPX may retest the 3450 level this week but it is poised to move higher.
The technical indicators are once again primarily positive showing investors intend to push the index still higher. There are a number of signals forming that indicate the index is once again reaching into overbought levels which means dips are more likely to occur on Monday. However the indicators are strongly bullish which means dips remain opportunities to put in place more trades. The outlook for the start of the week is still higher.
On Monday the bond market is closed for Columbus Day. Often this results in lower volume on the stock markets and lower volatility. Investors are betting on a stimulus package of some kind and some size being approved before the elections. If that stimulus package fails to be passed, stocks will pullback, but for Monday sentiment is bullish.
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