On Wed Aug 25 2021 the markets pushed to the historic 4500 level testing resistance multiple times intraday before closing below it at 4496 an advance of almost 10 points. The big story though was the push to 4500 on good volume.
The NASDAQ rose 22 points for another new high, ending the day at 15041 and touching 15059 intraday.
Let’s review Wednesday’s close to see what technical changes occurred and what investors should expect for Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Aug 25 2021
The most important signal in the chart is still the Bollinger Bands Squeeze. You can see in the squeeze that Wednesday’s candlestick ended the day at the Upper Bollinger Band which is still showing signs it is ending as the Lower Bollinger Band is falling while the Upper Bollinger Band is rising. The closing candlestick on Wednesday is bearish for Thursday, The Lower Bollinger Band is now down to the 50 day moving average. If it breaks below it on Thursday, it is another signal there are still further new highs to come shortly.
All the major moving averages are still climbing which is bullish. For Thursday the SPX chart remains bullish with only the closing candlestick advising we could see a negative close on Thursday.
Stock Market Outlook review of Wed Aug 25 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is trending sideways and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday Aug 18. On Wednesday the down signal turned into a neutral to perhaps slightly up 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 rising.
- 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 strong up signal in place and is back to being 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 entering overbought 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 rising which indicates we should see more swings in prices 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:
4500 is resistance
4490 is resistance
4475 is resistance
4450 is light support
4400 is good support
4370 is good 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 26 2021
With the SPX now at 4500, the 4400 level becomes good support while the 4450 is light support. Resistance is still at the 4475, 4490 and 4500 levels.
For Thu Aug 26 2021 the technical indicators are signaling a probable second sideways day but this one with a bit more chance for a negative close.
The technical indicators are now moving higher but a number of beginning to show overbought readings which will mean dips again on Thursday.
Dips on Thursday, no matter how deep, are still opportunities to setup trades. Thursday we get the Jackson Hole symposium with Powell speaking on Friday. On Friday we also get the personal consumption expenditures which the Fed likes to use as an inflation gauge. As well on Friday we get the University of Michigan consumer sentiment readings.
The SPX will try again to break 4500 on Thursday and there will be dips back below it. The close may be negative but there is a good chance the close will be at or just above 4500. Whatever happens on Thursday, the bias remains bullish, even with dips.
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