Wednesday saw the rally from Tuesday recovered. The Dow Jones Index closed above 23000 prompting many analysts to declare the bear market as over and a new bull market to have begun. I think they are premature.
The S&P rose 90 points to close at 2750 for a 3.4% gain.
On Wednesday the index received another down signal from the moving averages which may weigh on stocks on Thursday. Let’s take a look.
Stock Market Outlook Chart Comments At The Close on Wed Apr 8 2020
The SPX chart continues to be bearish with 6 sell signals in the chart. A new sell signal occurred today as the 50 day moving average fell below the 100 day moving average. The 21 day moving average is trying to turn sideways which could signal that the Bollinger Bands Squeeze will send stocks higher. We should know shortly.
The index is continuing to hold above 2500 and for the third day, the index closed above the 21 day moving average. The closing candlestick is bullish for Thursday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and is still above the red line in the technical chart which was resistance.
- 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 strong 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 is also above the prior resistance line.
- 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 now signaling 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 it too is above the prior resistance line.
- 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 and also above the resistance line. The dip back is signaling we may see a day ahead with prices moving lower.
- 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:
2700 is strong resistance and was 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.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. More analysts are jumping onto this level as where the correction is heading.
Stock Market Outlook for Tomorrow – Thu Apr 9 2020
For Thursday the technical indicators are still quite positive aside from the Rate Of Change which is signaling we may see some lower prices on Thursday.
For the final day, it won’t be surprising to see the index close slightly lower ahead of the long Easter weekend as many investors will not want to hold too many positions over the long weekend.
The chart shows another down signal with the 50 day now below both the 200 and 100 day moving average. The biggest question is which direction the Bollinger Bands Squeeze will see stocks end, lower or higher. For Thursday we will see some weakness and a lower close.