Wednesday saw the S&P make another new intraday and closing high, ending the day up 14 points at 4358. But Wednesday also saw Fed minutes that showed the economy is not at the point of a rate hike but tapering of the liquidity level could come this year and that may weigh on markets on Thursday.
The technical indicators by the close were still holding a bullish stance but there were some signals advising investors to be a bit cautious following the Fed minutes. Let’s review Wednesday’s technical indicators to see what they predict for Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Jul 7 2021
The S&P closed at the Upper Bollinger Band. The Lower Bollinger Band continued to fall on Tuesday which is bullish.
The closing candlestick on Wednesday is another bearish candlestick for Thursday. It is signaling the index is still overbought.
The 50 day moving average is turning a bit lower by the close on Wednesday but the 21, 100 and 200 day moving averages are still climbing.
Stock Market Outlook review of Wed Jul 7 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive. It is signaling we should expect further weakness on Thursday.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Friday June 25. That up signal was strong on Wednesday.
- 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 and signaling overbought.
- 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 for Thursday and is signaling extremely 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 and still showing overbought readings.
- 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 indicating we should expect some price movement on Thursday, up or down.
- 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:
4350 is resistance
4300 is resistance
4290 is resistance
4270 is light support
4250 is light support
4225 is light support
4200 is light support
4175 is light support
4150 is light support
4100 is good support
4070 is light support
4050 is light support
4000 is good support
3900 is support
3850 is support
3800 is support
3750 is good support
3700 is light support
3680 is light support
3600 is strong support
Stock Market Outlook for Tomorrow – Thu Jul 8 2021
On Wednesday investors’ initial reaction to the Fed minutes was to buy stocks and send the index higher. However after hours reports indicated that the Fed did see an improvement in the economy although it still has a long way to go for a full recovery but while interest rates may not rise until 2023 or late 2022, a tapering of the enormous amounts of liquidity may start in the second half of this year. That will put pressure on the overbought market on Thursday and we could see a down day. For that reason the outlook is cautious and lower until we see how investors react on Thursday and whether there will be further weakness on Friday. The outlook is for a lower close on Thursday.
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