I had expected another move above 2900 on Wednesday and then more selling and weakness as the index slipped back below 2800. Instead word arrived that results from Gilead’s anti-coronavirus drug remdesivir showed encouraging results and was being fast tracked by the FDA to treat patients with COVID19. The drug, when applied early in the infection had good results and that combined with solid earnings from Alphabet Stock (GOOGL), MasterCard Stock (MA), and others was more than enough to get stocks roaring again. The rally was huge and engulfed a broader spectrum of stocks. The index closed up 2.6% to 2939.
Stock Market Outlook Chart Comments At The Close on Wed Apr 29 2020
The SPX chart continues to be bearish with 6 sell signals in the chart. On Wednesday the index closed above the 100 day moving average and at the 200 day moving average for the first time since since falling below it on Feb 24. It has been a wild 2 months for equities with a stunning market collapse and emergence of a bear market and then a monster rally which most analytical sources claim is the biggest rally in wall street history.
The 200 day moving average is still leading the market, which is typical in a bear market. It is followed closely by the 100 day and the 50 day. The 50 day is falling quickly and the 21 day is ready to move above the 50 day which will be an up signal when it occurs.
The closing candlestick on Wednesday is signaling caution. It is not signaling that a major drop of any kind should be expected but that dips are likely as the index is extremely overbought.
The Upper Bollinger Band is turning back up while the Lower Bollinger Band is turning sideways.
Stock Market Outlook review of Wed Apr 29 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and 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 Thursday March 26. The up signal was stronger 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 rising and positive.
- 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 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 rising and signaling overbought.
- 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 turned sideways which indicates no major change in pricing should be expected.
- 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:
2900 is resistance
2860 is resistance
2840 is resistance
2800 is resistance
2725 is light support
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Thu Apr 30 2020
The rally was huge on Wednesday and it has left the index in a very overbought condition. That does not mean it cannot climb higher. This rally has often left the index overbought. It does however mean the chance of dips is higher.
After the close on Wednesday, the index looks set to try to push still higher on Thursday. Even if the day ends negative, the underlying strength remains bullish. The closing candlestick is advising to stay a bit cautious as the index closed in the narrow band between the 200 day moving average and 100 day which can lead to a bit of volatility as the index sorts out whether to push higher or slip lower. No large moves are expected, either way, on Thursday.
For the final day of April, the SPX outlook is overbought, dips likely but bullish overall even with dips.
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