Wednesday saw further gains on the markets but sellers kept emerging as the S&P reached to break through 2600 and the NASDAQ closed off the day’s high.
Stock Market Outlook Chart Comments At The Close on Wed Jan 9 2019
The S&P chart is still bearish with 6 sell signals but for a second day the S&P spent the entire day above the 21 day moving average, a good sign for the bulls. Meanwhile the 50 and 100 day moving averages are starting to turn back up which could be an early signal for the bulls.
Note how the Upper Bollinger Band is still falling lower and the Lower Bollinger Band is rising. This could be a new signal to the upside for a few days still before either the index enters a Bollinger Bands Squeeze or the S&P moves back lower.
The closing candlestick on Wednesday is another reversal candlestick which is now the third in a row. Almost always this signals that a change in trend should be felt within days.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising.
- 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 stronger today.
- 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 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 an up signal in place. It is also 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.
- 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 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 resistance
2675 is light resistance
2650 is light resistance
2620 is light resistance
2600 is strong resistance.
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 Jan 10 2019
All the technical indicators are positive and continue to point to further gains ahead for the S&P. However Wednesday also saw the index unable to break much beyond 2595 as each rally above 2590 met with selling.
Despite the technical indicators being overly bullish, I think Thursday will end up lower on the day as investors take profits and the rally catches its breath so-to-speak.
The outlook is still higher, but as the index approaches 2600 selling will be more determined. That has changed the bias to lower for Thursday.
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