Wednesday morning saw the index climbing on good volume and broad participation. Many investors seemed to believe the Fed would be accommodative and take it slow when it came to raising rates and reducing its balance sheet. But a short-lived rally at 2:00 PM as the Fed announcement on holding rates steady was made known quickly fell apart as Fed Chair Powell spoke, indicating clearly that the Fed is moving ahead with reducing liquidity to reduce their balance sheet and to raise rates. No timeline was set which added to the confusion. Investors began to sell and by the close the day’s gains were wiped out and the S&P closed down 6 points and the NASDAQ closed up 2.8 points. There are new down signals this evening after the close that warn investors the bias is changing to lower for now.
Let’s review Wednesday’s close to see what Thursday will look like for stocks.
Stock Market Outlook Chart Comments At The Close on Wed Jan 26 2022
The closing candlestick on Wednesday is bearish and signals another move lower. The candlestick’s two shadows advises investors there is uncertainty among investors which is shifting the bias to sellers.
The Upper Bollinger Band is turning sideways which at this point is bearish. The Lower Bollinger Band is falling, which at present is bearish. The candlestick closed inside the Lower Bollinger Band which is often seen as a signal selling may be slowing. That may not be the case on Thursday.
The 21 day moving average has fallen below the 50 day moving average which is a new down signal.
The 100 day is falling which is bearish. The 200 day moving average is is turning sideways which is neutral.
For Wednesday the chart is very bearish and the index closed below the 200 day moving average for a second day. The inability of the index to rise back above the 200 day indicates a move lower is expected for Thursday.
Stock Market Outlook review of Wed Jan 26 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and is negative. It is still signaling oversold and a bounce higher is expected.
- 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 was strong but unchanged at a minus 36.23. The MACD histogram is at a point where we often can expect a large 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 unchanged but not signaling oversold.
- 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 and is signaling oversold.
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 very oversold. It is reaching levels where a bounce back should be expected.
- 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 deeper indicates lower prices are still ahead.
- 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 resistance
4670 is resistance
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
4490 is light support
4475 is light support
4450 is support
4400 is good support and the 200 day moving average
4370 is light support
4350 is light support
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
Stock Market Outlook for Tomorrow – Thu Jan 27 2022
For Thursday the big event is Apple’s earnings after hours but the outlook is poor. With a couple of new down signals in place and th bounces in the index still not holding, the outlook is for a lower day on Thursday.
There is a good chance the SPX will fall back to the low of Monday around 4222. If that happens the next support level is 4200.
The outlook remains bearish following the Fed’s announcement and press conference on Wednesday.
Stock Market Outlook Archives
Stock Market Outlook for Mon May 6 2024 – Unconfirmed MACD Up Signal
Morning Investing Strategy Notes for Fri May 3 2024
Stock Market Outlook for Fri May 3 2024 – All About The April Non-Farm Payroll Report
Morning Investing Strategy Notes for Thu May 2 2024
Stock Market Outlook for Thu May 2 2024 – Potential Bounce But Lower
Morning Investing Strategy Notes for Wed May 1 2024
Stock Market Outlook for Wed May 1 2024 – Bounce But Lower – Fed Interest Rate Decision
Morning Investing Strategy Notes for Tue Apr 30 2024
Stock Market Outlook for Tue Apr 30 2024 – Dips Likely – Flat To Higher Close
Morning Investing Strategy Notes for Mon Apr 29 2024
Stock Market Outlook for Mon Apr 29 2024 – Some Weakness But Higher
Morning Investing Strategy Notes for Fri Apr 26 2024
Stock Market Outlook for Fri Apr 26 2024 – Higher and Positive Close
Morning Investing Strategy Notes for Thu Apr 25 2024
Stock Market Outlook for Thu Apr 25 2024 – Weakness and Lower
