Stock Market Outlook for Thu Dec 8 2022 – Confirmed Down Signal – Potential Bounce

It was a fairly uneventful day on Wednesday with lower volume but of that volume it was still more bearish than bullish.

The SPX closed down 7 points and the NASDAQ closed down 56. On both indexes 60% of all volume was being traded to the downside.

Let’s review the technical indicators at the close on Wed Dec 7 2022 to see what to expect for Thu Dec 8 2022.

Stock Market Outlook Chart Comments At The Close on Wed Dec 7 2022 

On Wednesday the S&P closed below the 200 day, 21 day and at the 100 day moving average which is bearish. The closing candlestick is bearish but also signaling a potential for a bounce on Thursday.

The Upper Bollinger Band crossed above the 200 day on Wednesday November 16 which is a bullish signal. On Wednesday the Upper Bollinger Band continued moving lower and the Lower Bollinger Band is still rising and is ready to move above the 50 day moving average. This will be bearish and could signal the start of a Bollinger Bands Squeeze which, at present, looks like it will send stocks lower later this week.

A second up signal was generated on Wednesday Nov 30, with the 21 day moving above the 100 day.

The first up signal was Friday Nov 11 when the 21 day moving average moved above the 50 day.

The 50 and 100 day moving averages are turning higher. The 200 day is trending sideways. All three are bullish signals.

There are now 4 down signals in place since April 24 and two up signals.

The chart though is 80% bearish for Thursday.

Stock Market Outlook review of Wed Dec 7 2022

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and negative.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal Tuesday Dec 6 2022. On Wednesday the down signal was confirmed. The histogram is negative.

• 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 and negative.

• 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.

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.

• 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.

• 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:

4150 is resistance

4120 is resistance

4100 is resistance

4090 is resistance

4070 is resistance

4050 is resistance

4030 is resistance

4025 is light support

4000 is light support

3975 is light support

3965 is light support

3950 is good support

3925 is light support

3900 is good support

3875 is light support

3850 is light support

3830 is light support

3810 is light support

3800 is good support

 Stock Market Outlook for Tomorrow – Thu Dec 8 2022 

For Thursday the technical indicators are again all bearish. There are no up signals. The MACD down signal from Tuesday was confirmed on Wednesday. A number of the technical indicators are already giving negative readings.

The S&P chart is 80% biased to the downside for Thursday but the closing candlestick advises there is still the possibility of a bounce.

Potential Economic and Political Market Moving Events

This week the biggest events are on Friday with consumer sentiment and 5 year inflation reports. Thursday’s Weekly Unemployment report might affect stocks but is not expected to do so.

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims are expected to be 230,000

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