Stock Market Outlook for Thu Aug 19 2021 – Unconfirmed Down Signal – Lower Close

Wed Aug 18 2021 saw the expected bounce in the morning and then the market slipped until shortly before the Fed minutes were released.

The initial reaction was a bounce followed by a dip and a second bounce. That bounce failed to rise above the 2:05 PM rally and that signaled to traders, it was time to sell. The SPX index fell from 4443 at 2:35 PM to 4400 by the close for a drop of 1% in an hour and a half. The close saw the index down 47 points to end the day at 4400, the day’s low.

Let’s look at the closing technical indicators from Wednesday to see what to expect for Thu Aug 19 2021.

Stock Market Outlook Chart Comments At The Close on Wed Aug 18 2021 

On Wednesday the S&P closed below the 21 day moving average which is bearish. The drop left behind a bearish candlestick for Thursday.

The Lower Bollinger Band and Upper Bollinger Band have turned sharply into a Bollinger Bands Squeeze which at present is positions to send the index lower.

All the major moving averages are still climbing which is bullish. For Thursday the SPX chart has turned decidedly bearish.

Stock Market Outlook review of Wed Aug 18 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and neutral to negative.

• 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 Aug 12 2021. On Wed Aug 18 2021 the MACD issued an unconfirmed but strong, down signal.

• 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 a down signal in place and not 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 starting to enter oversold readings.

• 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 sharply.

• 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:

4475 is resistance

4450 is resistance

4400 is light support

4370 is support

4350 is light support

4300 is light support

4290 is light support

4270 is light support

4250 is good support

4225 is light support

4200 is good support

4175 is light support

4150 is light support

4100 is good support

4070 is light support

4050 is light support

4000 is good support

3900 is support

3850 is support

3800 is support

3750 is good support

3700 is light support

3680 is light support

3600 is strong support

 Stock Market Outlook for Tomorrow – Thu Aug 19 2021 

As investors can see in the Support and Resistance levels above, the 4400 is light support. That means it can break easily.

For Thu Aug 19 2021 the SPX is facing a new unconfirmed down signal. As well the close below the 21 day moving average indicates there is a good chance for a dip below to the 50 day moving average.

The SPX is no longer very overbought. That means on Thursday the index has a good chance to dip lower in the morning before a bounce attempt later in the day.

For Thursday then, the morning will see a move lower with support at 4370 and 4350. A bounce later in the day will cut some of the morning loss but unless buyers are ready to try to buy Thursday’s dip which is unlikely, the index will close lower.

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