For Friday I had expected more dips but a slightly positive close for the S&P. Instead, news that China’s delegation to Montana cancelled a planned visit and announced their delegation would be returning home sooner than expected, sent stocks plunging in a short few minutes in the early afternoon. A rally attempt failed and the index closed down below 3000 at 2992.07, for another slight loss.
Stock Market Outlook Chart Comments At The Close on Fri Sep 20 2019
The buy signal from Thursday was still evident on Friday as the 21 day moving average climbed further above the 50 day.
The closing candlestick on Friday however was bearish for Monday, following Friday’s afternoon decline which was on heavy volume thanks to triple witching on Friday.
The 100 and 200 day moving averages are still climbing, as they continue to signal higher prices are ahead for stocks.
The S&P chart is fairly bullish heading into the final week of September, but you can clearly see that the index is stuck at 3000 and having trouble pushing to new highs. Looking at the chart below you can see that the same pattern emerged in mid through late July which ended with stocks sliding lower in August.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Thurs Aug 29. The up signal was weaker again by the close 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 positive but falling.
- 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 sell signal in place and is 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 falling sharply partly because of the sharp drop early Friday afternoon.
- 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 falling indicating lower prices are ahead for the start of the final week of September.
- 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 good support
2950 is light support
2900 is light support
2860 is light support
2840 is support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
Stock Market Outlook for Tomorrow – Mon Sep 23 2019
The 3000 level remains strong resistance for the index. Investors are continuing to trade by buying dips in the index and then selling out when stocks rally, but in general most are not taking on new positions at present. This would suggest there is limited optimism to the upside for a breakout but a lot of investors are in a “wait and see” mode. If stocks break out, they will jump in but only if they break out convincingly. At present there are no signs of that happening.
Monday looks set to start with a rally attempt again, and then another dip back down. The index remains stuck sideways and the technical indicators are pointing to more weakness for Monday.
We are continuing to see sideways action which suggests investors are not willing yet to sell, but they are not willing to place more capital into stocks at this level. Until that happens and we see new capital starting to move into stocks, the chance of a sustained rally are slim to none.
Monday should end flat to lower which means the outlook is sideways with the bias lower.