Markets on Wednesday opened lower as investors prepared for what they expected would be Fed minutes showing a far more aggressive move to reduce the Fed’s balance sheet. Instead the minutes released in the afternoon indicated the Fed would start with reducing 95 billion a month from Treasurys and mortgage-backed securities. They also indicated the next interest rate increase would probably be half a percent, up from a quarter percent. They also indicated future rate increases could also be half a percent as the Fed remain committed to fighting inflation. Many analysts before the Fed minutes were released expected a balance sheet reduction of anywhere from 150 to 250 million a month so the news of 95 billion caught investors by surprise. The half a percent interest rate increases was expected by most analysts. For that reason the indexes which were lower, ended the day off their lows.
The S&P ended the day down 44 points at 4481. The NASDAQ was worse, losing 315 points for a 2.2% loss on the day and closing below 14,000 at 13,888.
Let’s review the technical signals from Wednesday’s close to see what investors should expect for Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Apr 6 2022
The 21 day moving average continued to climb above the 50 and 200 day moving average which is bullish.
The closing candlestick is bearish for Thursday although often it is followed by a bounce either on the proceeding day or the day following.
The candlestick fell to close at the 100 day moving average but did reach the 21 day intraday before rallying back up, into the close.
Meanwhile the Upper Bollinger Band in now turning lower but you can also see the Lower Bollinger Band is turning sharply higher. This is bearish.
The 200 day moving average is back at the 4400 level which is bullish. The 50 day has continued to stay above the 200 day which is bullish. The 100 day moving average is trending sideways. These are all bullish signs.
The SPX still has 4 down signals in place and 1 up signal.
The chart is still more bearish than bullish for Thursday. If Thursday does end lower the chart will become more bearish. There are some interesting signals from the technical indicators, which you can read about below.
Stock Market Outlook review of Wed Apr 6 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged on Wednesday despite the second day of a sell-off. Obviously there is some strength still to momentum.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal Wed Mar 16 2022. On Wednesday both the MACD up signal and the histogram have lost most of their strength. They could issue a down signal as soon as Thursday or Friday unless the index can swing back up.
- 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 also unchanged from Tuesday’s reading on Wednesday, despite the market sell-off.
- 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 a down signal in place and is showing the market is no longer 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 falling and bearish.
- 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 falling which normally indicates that price action on Thursday will not be as great as we saw on Tuesday and Wednesday. That could mean a move lower in the index may not be very deep on Thursday.
- 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:
4650 is resistance
4640 is resistance
4625 is resistance
4600 is strong resistance
4590 is resistance
4575 is light support
4560 is support
4550 is light support
4525 is light support
4500 is support
4490 is light support
4475 is light support
4450 is light support
4400 is support
4370 is light support
4350 is light support.
4300 is good support
Stock Market Outlook for Tomorrow – Thu Apr 7 2022
The rebound in the index late in the day kept some of the technical indicators unchanged on their outlook. This shows there were buyers present on Wednesday who were sitting back and waiting for the Fed minutes and to see what the market would do after the minutes were released. Once the market dropped to a new intraday low in the afternoon after the release of the Fed minutes, buyers picked through stocks.
The Fed minutes were not as aggressive as most analysts expected and that could assist in getting a bounce of some kind on Thursday or Friday. At this stage though, no bounce will hold beyond a day or two.
Nonetheless there are enough bearish signals in both the chart and in some of the technical indicators to expect a lower day on Thursday.
There will be some swings in the market on Thursday as Initial jobless claims are released at 8:30 and Fed President Bullard speaks at 9:00 AM before the markets open which could send the market lower. Then at 2:00 PM two more Fed Presidents speak. They also could send the market lower as well.
Potential Market Moving Events
These are the events this week that could move markets.
Thursday
8:30 Initial Jobless Claims and continuing jobless claims are reported.
9:00 Fed President Bullard speaks on the economy – could see some market movement before the open depending on how hawkish or dovish his speech is.
2:00 Fed Bank Presidents Evan and Bostic speak. They could move markets lower if hawkish.
Friday
10:00 Whole inventories which are expected to come in a 2.1% which is unchanged.
Stock Market Outlook Archives
Stock Market Outlook for Fri Apr 19 2024 – Deeply Oversold – Bounce Likely – Higher Close
Morning Investing Strategy Notes for Thu Apr 18 2024
Stock Market Outlook for Thu Apr 18 2024 – Deeply Oversold – Bounce Attempt Expected
Morning Investing Strategy Notes for Wed Apr 17 2024
Stock Market Outlook for Wed Apr 17 2024 – Another Bounce Attempt
Morning Investing Strategy Notes for Tue Apr 16 2024
Stock Market Outlook for Tue Apr 16 2024 – Deeply Oversold
Morning Investing Strategy Notes for Mon Apr 15 2024
Stock Market Outlook for Mon Apr 15 2024 – Expect A Bounce
Morning Investing Strategy Notes for Fri Apr 12 2024
Stock Market Outlook for Fri Apr 12 2024 – All About Bank Earnings
Morning Investing Strategy Notes for Thu Apr 11 2024
Stock Market Outlook for Thu Apr 11 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 10 2024
Stock Market Outlook for Wed Apr 10 2024 – All About The CPI Numbers
