Wednesday saw stocks start the day under some pressure as the markets are overbought. However it was reports of a further delay in any trade deal with China that sent stocks lower early afternoon in a plunge from 3113 down to 3091 within half an hour. By 1:30 the worst of the selling was over and the remainder of the day the index struggled back to close above 3100 at 3108. Considering that the index has only light support around the 3030 valuation, dips like today work toward building support levels. A new light support level may be starting to build around the 3080 to 3090 valuation, but we will know more in the next couple of weeks.
Stock Market Outlook Chart Comments At The Close on Wed Nov 20 2019
The SPX chart is still bullish, but again there are signs of weakness. The Upper Bollinger Band is starting to turn sideways as the market is no longer pressuring the Upper Bollinger Band higher. The candlestick at the close today is again bearish although the fact that the index fell almost to 3090 and then recovered to 3108 left behind what is often a signal that the next move will be back up.
All the remaining signals are still bullish.
3030 is still light support. All the major moving averages are still climbing including the 50 and 21 day moving averages. The 21 day moving average is still rising above the 3030 level which is bullish. The 50 day is above the 3000 level which is also bullish and is nearing the 3030 level.
As explained over the past two days, we should normally expect a dip or a couple of negative closes as the 50 day approaching this support level. This is common.
The Lower Bollinger Band has moved above the 100 day moving average which is bullish.
The 100 and 200 day moving averages are still rising.
The two buy signals from September are still in place.
Overall the chart remains bullish but as we saw yesterday, a pause in the rally is expected again on Thursday.
Stock Market Outlook review of Nov 20 2019
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 Tue Oct 15 2019. The up signal was losing strength again on Wednesday.
- 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 falling and overbought.
- 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 is extremely overbought and has a 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 overbought and falling.
- 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 moving sideways which indicates we should not expect much change in prices.
- 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:
3100 is resistance
3030 is light support
3000 is support
2960 is light support
2950 was 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
Stock Market Outlook for Tomorrow – Thu Nov 21 2019
The technical indicators are turning down and we now have a down signal from the Slow Stochastic. As well, MACD has lost a lot of strength.
Investors shouldn’t be surprised at the weakness as the market is overbought and due for a pause. This does not signal an end to the rally.
The negative news on a possible delay in a trade deal with China was used by many investors as an excuse to take profits and volume was very high on Wednesday which means there was a lot of selling taking place, but also a lot of buying.
For Thursday the index will be lower, but a bounce could happen at any time and Friday still looks like it will be higher by the close of trading.
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