Comments from Fed Chair Powell seemed more dovish to investors on Wednesday afternoon and stocks shot higher. By the end of the day the S&P has jumped 122 points to close at 4080 and the NASDAQ climbed 484 points to end the day at 11,488.
Many analysts were caught by surprise with the strength of the rally based on what they said were “nothing new” from the Fed. It was the Fed Chair’s tone that sparked the rally as he seemed to indicate that while future interest rate hikes would be coming, they would be smaller. Investors took this as a softening of the Fed’s stance despite Powell’s reiteration that the Fed was in this fight with inflation “to the end”.
Volumes jumped on Wednesday with more than7 billion shares traded on each of the SPX and the NASDAQ. For the NASDAQ it was the third biggest one day point gain since March 16 when the index jumped 487 points. On Nov 10 the index jumped 760 points.
For the S&P it was the third biggest one day jump since Nov 10 when the index climbed 270 points and May 4 when it climbed 124 points.
Let’s review the closing SPX technical indicators from Wednesday to see if the rally can continue Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Nov 30 2022
On Wednesday the S&P closing candlestick ended the day back above the 200 day moving average. The candlestick is bullish for Thursday and is signaling a temporary overbought condition may have built on Wednesday’s rally. That usually means some softening in the morning with a dip possibly as low as 4050 but a move higher is more likely.
The closing candlestick is above all the moving averages which is bullish.
The Upper Bollinger Band crossed above the 200 day on Wednesday November 16 which is a bullish signal. On Wednesday it was back climbing higher.
The Lower Bollinger Band is turning lower which often signals a larger move higher could be coming.
A second up signal was generated on Wednesday with the 21 day moving just above the 100 day. This ends the down signal from Oct 14 which you can see has been removed from the chart.
The first up signal was Friday Nov 11 when the 21 day moving average moved above the 50 day.
The 50, 100 and 200 day moving averages are all turning sideways which is bullish.
There are now 4 down signals in place since April 24 and two up signals.
The chart is 80% bullish for Thursday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- 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 Oct 16. On Wednesday the up signal gained a bit of strength but is still weak. The histogram has also lost most of its strength.
- 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 and on the verge of overbought signals.
- 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 still overbought but the down signal could turn to an up signal by Thursday.
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, positive and into 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 sharply and still positive.
- 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:
4100 is resistance
4090 is resistance
4070 is resistance
4050 is resistance
4030 is resistance
4025 is resistance
4000 is resistance
3975 is resistance
3965 is resistance
3950 is resistance
3925 is light support
3900 is light support
3875 is light support
3850 is light support
3825 is light support
3800 is good support
Stock Market Outlook for Tomorrow – Thu Dec 1 2022
For Thursday some weakness should be anticipated but nothing that will end the rally. A higher close should be expected. On any weakness I will be buying SPY call options in the SPY Market Direction Portfolio.
Technical indicators have swung back to bullish and should have even stronger bullish signals by Thursday’s close.
Potential Economic and Political Market Moving Events
On Thursday we get inflation reports and on Friday we get the November non-farm payroll numbers.
8:30 Weekly Initial Unemployment Insurance Claims are expect to be weaker at 235,000
8:30 PCE prince index
8:30 Core PCE price index
8:30 Real disposable income and consumer spending
9:45 S&P manufacturing PMI
10:00 ISM manufacturing index
10:00 Construction spending
Throughout the day – auto sales
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