Wednesday saw weakness which was expected and a slightly lower close for all three indexes. Sellers were dominant but they did not chase buyers lower. They sat at the highs of the day and pushed back at buyers who pushed stocks back higher intraday. The close was weak.
Stock Market Outlook Chart Comments At The Close on Wed Feb 6 2019
The S&P is still bearish with 6 sell signals.
There is still 1 up signal as of Jan 31 when the 21 day rose above the 50 day.
The 50 day moving average is slowly climbing but the 100 and 200 day are still not showing any signs of potentially rising.
The closing candlestick on Wednesday was bearish for Thursday and the index closed just below the Upper Bollinger Band.
The Lower Bollinger Band and the Upper Bollinger Band are turning higher indicating there is more upside ahead for the S&P.
The chart is still predominantly bearish which is why caution is still worth observing. The index needs more buy or up signals to indicate that the correction did indeed end on Dec 24 2018.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling slightly.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Jan 4 2019. That up signal was strong again on Wednesday.
- 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 signal was falling slightly and is overbought.
- 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 in place for Thursday and is still 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 overbought.
- 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 indicating some weakness should be expected.
- 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 Resistance Levels To Be Aware Of:
2900 was support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong resistance
2795 is light resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is still resistance
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Thu Feb 7 2019
The technical indicators are still predominantly overbought. With a bearish candlestick for Thursday and strong overbought signals from most technical indicators, the index will close lower on Thursday.
This is not any indication of the rally ending, but it is stalling as sellers continue to take profits.
Weakness and a lower close on Thursday should be followed by a better day on Friday.
Stock Market Outlook Archives