Stock Market Outlook for Thu Jan 4 2024 – Bounce Likely

Prior Trading Day Summary:

On Wednesday investors continued selling stocks sending the S&P down 38 points to close at 4704. The NASDAQ fell 173 points to close at 14592. It was a second day of selling and historically, the end to the Santa Claus rally period. If the mantra rings true ““If Santa Claus should fail to call, bears may come to Broad and Wall” then we could see more downside this year. The next three trading days are important. If the first 5 days of the new year-end lower, the index has good chance of ending the year lower.

Let’s review Wednesday’s trading action to see the chance for a bounce on Thursday or Friday.

Stock Market Outlook: SPX Closing Chart For Wed Jan 3 2024

The index closed above all major moving averages but well below the Upper Bollinger Band.

The 21 day moving average is rising further, which is bullish but is starting to turn sideways.

The closing candlestick is bearish for Thursday but is almost down to the 21 day which often will see a bounce attempt.

The 50 day moving average is above the 100 day and still climbing which is bullish.

The 100 and 200 day moving averages are climbing which is bullish.

The Lower Bollinger Band has moved back above the 50 day moving average which is bearish. The Upper Bollinger Band is starting to turn down which is bearish.

The S&P chart is less bullish heading into Thursday.

Stock Market Outlook review of Wed Jan 3 2024

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Thu Jan 4 2024 

The selling has taken the SPX back through all the resistance levels listed above. It is now sitting just above the first support level at 4675. A bounce should be expected.

As well, the index closed just above the 21 day moving average. On Thursday we could see some selling push the index lower, down to the 21 day and then see a bounce.

Overall the selling seems overdone with many stocks that had terrific year ends in 2023 being sold off and other stocks like financials and health care being rotated into.

My own opinion is tech stocks being sold heavily will turn out to be a mistake and I expected tech stocks to bounce back. When they do, we will see a lot of  capital move quickly back into them.

For Thursday we could see stocks try to bounce and possibly close higher. If that does not happen on Thursday we should see a bounce Friday. The MACD technical indicator issued a confirmed down signal on Wednesday after the close.

Potential Economic and Political Market Moving Events

Major economic events this week include the latest Fed minutes on Wednesday at 2 PM and Friday is the December non-farm payroll numbers. Both of these events could swing markets.

Tuesday:

9:45 S&P final manufacturing PMI was expected at 48.2 but came in at 47.9

10:00 Construction spending was expected unchanged at 0.6% but came in weaker at 0.4%

Wednesday:

10:00 Job openings came in as expected at 8.8 million

10:00 ISM manufacturing rose to 47.4%

2:00 Minutes of Fed’s December meeting held no surprises

Thursday:

8:15 ADP employment is expected to be 130,000

8:30 Weekly Initial Unemployment Insurance Claims are expected to be 219,000

9:45 S&P final US services PMI is expected to be unchanged at 51.3