On Friday markets spent much of the day in a sideways pattern but with a bias higher. The index fell to 3440 during the day but that brought in buyers and the close ended higher up 11 points to close at 3465. This was the second straight day with a close above 3450.
Stock Market Outlook Chart Comments At The Close on Fri Oct 23 2020
The two most important things in Friday’s SPX Chart is the continued rise of the 21 day moving average above the 50 day which normalizes the chart back to a bullish stance and the Lower Bollinger Band now reaching the 100 day which increases the likelihood of a Bollinger Bands Squeeze this week.
The closing candlestick on Friday is bullish for Monday.
The 200, 100, 50 and 21 day moving averages are climbing which is bullish.
The index still looks bearish but bullish strength is re-emerging and any positive news on the next covid-19 stimulus bill is sure to send the index back to the September highs.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and has turned negative.
- 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 Thursday MACD issued a new unconfirmed down signal. On Friday the down signal was still very weak an negative 0.36 which means the down signal from Thursday is not confirmed.
- 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 which is bullish.
- 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 to start the week.
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 moving sideways unchanged.
- 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 support
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 26 2020
To start the final week of October, Halloween Week, the SPX chart has returned to a more bullish stance. The move higher by the 21 day moving average returns the chart to a more normalized structure which is bullish. A Bollinger Bands Squeeze is coming this week but it could be positive.
As well, the technical indicators have also shifted and taken on a bullish stance. The Rate Of Change is virtually unchanged from Thursday which signals that a drop should not be expected. MACD still has a weak but unconfirmed down signal and momentum has slipped to negative. Both of these point to dips likely for Monday, but those dips are opportunities to setup trades.
The other technical indicators, especially the Slow Stochastic with an up signal, Relative Strength Index (RSI) climbing and the Ultimate Oscillator climbing, indicate Monday will end the day positive.
The market is still being held hostage to the stimulus bill debate. Positive news will send the index higher. Negative news will turn what should be a positive day on Monday, to a negative close.