On Tuesday Oct 6, markets were climbing higher as investors expected another stimulus package to be announced when President Trump announced he was ending negotiations with the Democrats which sent stocks plunging.
By the close the S&P was down 47 points for a loss of 1.4% to end the day at 3360.95.
Stock Market Outlook Chart Comments At The Close on Tue Oct 6 2020
On Tuesday the index closed just below the 50 day moving average but above the 21 day since the 21 day has fallen below the 50 day last week. The closing candlestick was bearish for Wednesday.
As well the Lower Bollinger Band is continuing to hold at the 100 day moving average but the Upper Bollinger Band is back falling lower moving closer to a Bollinger Bands Squeeze.
The 200 day moving average is still climbing. There are still 6 up signals and 4 down signals. The SPX chart is still slightly bullish but it won’t take much to turn it back to bearish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling but still 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 Tuesday the up signal was only slightly weaker.
- 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 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 an up signal in place which could easily turn neutral.
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.
- 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 back falling.
- 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 – Wed Oct 7 2020
Tuesday’s market was all about emotion. The rally through much of the day was emotion over the prospects for more stimulus to push markets still higher. Even Chairman Powell announced that it be impossible to provide too much stimulus.
The mid afternoon plunge was again emotional as investors felt without another stimulus package stocks could be construed as overvalued. Lower spending without another round of stimulus would mean lower earnings.
Both events were emotional and on Wednesday we will probably see emotions once again swing markets. Markets should attempt a bounce to start the day, especially on word after the close that the President wants to send out stimulus checks to the unemployed and provide more relief for business and airlines but leave out most other aspects of the larger covid-19 stimulus bill. Should that happen, stocks could again rally. On Wednesday I would expect a couple of failed rally starts but a flat to higher close is probably more likely than a further decline. So for Wednesday investors are looking at a mixed outlook for the day but the bias is still with the bulls.