Wednesday started wit a bounce which last half an hour. By 10:00 AM the high for the day was already in and stocks spent the rest of the day slipping lower. A rally over the lunch hour failed to recapture the morning high and that brought in more sellers. The close was particularly brutal with stocks being sold into the close. The day ended with the S&P down 44 points to close at 4532. The NASDAQ fell 166 points to close at 14340.
Volumes were strong throughout the day but not all of it was to the downside. Instead both the S&P and NASDAQ saw 30% of all stocks advancing on Wednesday which was double what investors saw on Tuesday. The close of the day felt more like an attempt to shake out nervous investors. Even Apple Stock which has been very resilient slipped in the last half hour to close at $166.23, the lowest close since October 6.
The NASDAQ is down 11.5% and into correction territory while the S&P is down 5.9% from its high made back on Jan 4. Markets are also very oversold and ready to bounce.
Let’s review the technical signals from Wednesday’s close on the SPX to see what they are advising for Thu Jan 20 2022
Stock Market Outlook Chart Comments At The Close on Wed Jan 19 2022
The closing candlestick on Wednesday is bearish but also points to a probable bounce on Thursday. The candlestick closed below the 100 day moving average which is bearish but also often signals a bounce.
The Upper Bollinger Band is rising which is a bullish signal. The Lower Bollinger Band is falling, which at present is bearish.
The 21 day and 50 day moving averages are falling which is bearish.
The 100 day is no longer climbing which is neutral. Only the 200 day moving average is rising which is still bullish.
For Thursday the chart is bearish. A bounce is expected on Thursday although an invasion of Ukraine by Russia should it occur, will end any chance of a bounce.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and is negative. It is showing oversold and ready to bounce.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Thursday Jan 6. On Wednesday the down signal gained more strength. The MACD histogram is at a point where we often can expect a bounce.
- 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 nearing oversold readings.
- 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 entering oversold readings.
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 oversold. Often we can expect a bounce shortly.
- 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:
4800 is resistance
4725 is resistance
4700 is support
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Thu Jan 20 2022
For Thursday the SPX technical indicators are all negative but a number are now showing oversold and ready to bounce.
We could see more selling in the morning but Tuesday’s heavy selling was not repeated on Wednesday. Instead we saw an uptick in buying interest. Much of the final half hour on Wednesday felt more like bigger investors trying to shake out smaller investors. We could see the same thing happen intraday on Thursday, especially in the morning, but the day should end higher. Should Russia surprise with an invasion of Ukraine, there will be a lower close.