Wednesday saw the latest FOMC minutes confirm the Fed’s attention is fighting inflation and more interest rate increases should be expected. Next week a three quarter point increase is likely.
Investor reaction was initially mildly negative and then positive until the final half hour when much of the rally was given back. Despite this the S&P closed up 13 points to end the day at 3845, near the 3850 support level.
The NASDAQ closed up 39 points to end the day at 11,361.
On Friday investor get the June non-farm payroll report. Normally we can expect stocks to be flat with a slightly higher close on the day before. Let’s review the technical indicators from Wednesday’s close to see what is in-store for Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Jul 6 2022
On Wednesday the closing candlestick is bearish. It indicates caution and advises that we could see the index close at the 21 day moving average. That would be a flat to slightly higher close.
The Upper Bollinger Band continues collapsing and is now below the 100 day moving average and the Lower Bollinger Band is rising. This could be a strong bearish signal. We will know more as the index heads into Friday.
All the moving averages are falling with the 50 and 21 day now falling rapidly. The closing candlestick on Wednesday was at the 21 day moving average but intraday it moved above the 21 day for a short period late in the day.
There are no bullish signals for Thursday in the chart.
There are 4 down signals still in place and there have been no up signals since the start of April.
The chart is 100% bearish for Thursday. Often a chart with a 100% bearish rating will see a bounce higher before more selling. A contrarian move is common with strong bearish as well as strong bullish signals.
Stock Market Outlook review of Wed Jul 6 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday June 27. On Wednesday the up signal gained strength as did the MACD histogram.
- 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 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 for Thursday.
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 and positive.
- 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 and Resistance Levels To Be Aware Of:
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is strong resistance
3975 is light resistance and is a decline of 17.5%
3900 is light resistance and is a decline of 19%
3850 is light resistance and is a decline of 20%
3825 is light support
3800 is good support.
3775 is light support
3750 is light support
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Thu Jul 7 2022
The technical indicators are more bullish than they were on Tuesday’s close. The S&P chart however is very bearish. Despite this, historically the day before June’s unemployment report has tended to be positive.
A primary concern at present is the Bollinger Bands signaling a possible further selling either late this week or into next. As well the 50 and 21 day moving averages are falling rapidly which usually indicates more downside still is ahead.
For Thursday investors should expect some weakness, especially in the morning but a higher close, even if only slightly, is expected.
Note in the market moving events below that factory orders came in much higher than expected which is seen as potentially inflationary. On Wednesday the latest FOMC minutes are released at 2:00. Watch for swings in the market on Wednesday in the half hour before and after 2:00 PM.
Potential Market Moving Events
For the first week of July the biggest event in on Friday when the June unemployment report is released.
Wednesday:
2:00 FOMC minutes remain hawkish with likely prospects of interest rate hikes in July and August.
Thursday:
8:30 Weekly Initial Unemployment Insurance Claims
Friday:
8:30 June nonfarm payroll report are expected to show 250,000 jobs created
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Stock Market Outlook for Tue Apr 16 2024 – Deeply Oversold
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