Stock Market Outlook for Thu Feb 4 2021 – Weakness Growing – Dips Likely

Wednesday saw another rally attempt with the S&P reaching to 3847 but sellers were numerous and the index struggled to stay positive.

By the close the S&P was up just 3 points to end the day at 3830.

The NASDAQ ended the day slightly lower to 13,610.

Stock Market Outlook Chart Comments At The Close on Wed Feb 3 2021 

The S&P stayed in a tight trading range on Wednesday but did close above the 21 day moving average for a second time. The close though left behind a candlestick signaling weakness for Thursday.

The 21 day moving average is turning back up while the Upper Bollinger Band is moving sideways and the Lower Bollinger Band is rising again which could be bearish shortly if it crosses above the 50 day moving average.

The 200, 100 and 50 day moving averages are still climbing despite last week’s selling.

The chart looks a bit weaker on Wednesday but is still in a position to push higher.

Stock Market Outlook review of Wed Feb 3 2021

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 on Wed Jan 27 2021. On Wednesday the down signal was weaker but at negative 6 it is still strong.

• 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 positive.

• 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 an up signal.

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 has turned sideways.

• 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.

• 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:

3850 is resistance

3800 is support

3750 is support

3700 is light support

3600 is strong support

3550 is support

3500 is strong support

3450 is support

3400 is support

3375 is support

3300 is strong support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is strong support

 Stock Market Outlook for Tomorrow – Thu Feb 4 2021 

For Thursday there are more signals pointing to further weakness developing. There is a potential for more dips and deeper ones on Thursday but overall the index still has a good chance for a higher close.

A lot may depend on the Weekly Initial Unemployment Insurance Claims which come out Thursday morning but stimulus talk is more likely to keep the rally alive at this point, than the weekly claims report.

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