On Friday investors returned to the buy side of the market and spent the entire day pushing the indexes higher. Let’s review the closing technical indicators to see what Monday might bring for stocks following Friday’s strong rally.
Stock Market Outlook Chart Comments At The Close on Fri Sep 25 2020
On Friday the index moved back in a major rally. The closing candlestick was bullish for Monday.
The Upper Bollinger Band is now falling following the Lower Bollinger Band’s move lower. This is bearish.
The 21 day is continuing to fall and could end up below the 50 day shortly unless the market can rally for several days.
The 50 period moving average is turning lower and needs to be watched this week for any further sell signal.
The index has now been trading below the 21 day moving average for 14 straight (trading) days without being able to climb back above it. This remains a strong bearish signal.
The 100 and 200 day moving averages are still climbing. There are still 6 up signals and three down signals. The SPX chart is bearish but pointing to signs of a possible continuation of Friday’s bounce.
Stock Market Outlook review of Sep 25 2020
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 Sep 4. On Friday the down signal was weaker and MACD is signaling the market as oversold.
- 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 oversold.
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 trending sideways indicating we shouldn’t see much downside in prices on Monday.
- 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 resistance
3375 is resistance
3300 was 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 Sep 28 2020
For Monday the technical indicators are signaling that the rally from Friday may have some staying power to start off the week.
Some dips should be expected on Monday, especially in the morning, but the bias for the day has shifted back to a higher close.
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