Stock Market Outlook for Thu Aug 16 2018 – Another Bounce Attempt

Wednesday saw the largest decline in the S&P since June 27. Losses were broad and the heatmap at times was almost entirely red as sellers dominated for most of the day.  All 3 indexes though did not close at their lows but instead staged a rally mid-afternoon and ended the day well off their lows.

Stock Market Outlook Chart Comments At The Close on Wed Aug 15 2018 

The S&P ended the day below the 21 day moving average. Intraday the index fell almost to the Lower Bollinger Band which at present is following the 50 day moving average. This left behind a bearish candlestick for Thu Aug 16 2018.

All the major moving averages are still climbing but you can clearly see the Bollinger Bands Squeeze is underway and the 21 day is turning sideways.

Stock Market Outlook review of Wed Aug 15 2018

Stock Market Outlook: Technical Indicators Review:

Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and falling.

MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a down signal on Mon Aug 13 2018. The down signal was stronger on Wednesday.

Ultimate Oscillator: 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. The Ultimate Oscillator signal is negative and trending sideways.

Slow Stochastic: 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. The Slow Stochastic has a down signal in place for Thursday.

Relative Strength Index: 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.  The RSI signal is falling.

Rate of Change: 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. The rate of change signal is moving lower.

Support Levels To Be Aware Of:

2795 is light support

2745 to 2750 is light support

2725 is light support.

2700 is support.

2675 is light support.

2650 is light support

2620 is light support

2600 is strong support.

There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.

The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.

 Stock Market Outlook for Tomorrow – Thu Aug 16 2018 

The technical indicators are now turning negative and MACD and the Slow Stochastic both have down signals in place. Meanwhile the market is oversold and normally we should expect another bounce attempt similar to what we saw on Tuesday after as strong a down day as we saw on Wednesday.

I am expecting the morning to open higher and then selling to emerge before the indexes begin to push back higher and close positive on Thursday.

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