Wednesday was another sideways day with a tight trading range. The SPX came within a point of reaching the all-time high of 4238 but closed down 7 points at 4219. On Thursday investors learn the latest CPI report which could impact stocks depending on how weak or how strong the number is. Many analysts believe it won’t be until later in the summer than we will see higher CPI numbers.
Let’s review the closing technical signals from Wednesday’s market.
Stock Market Outlook Chart Comments At The Close on Wed Jun 9 2021
The SPX ended the day flat again and left behind another bearish candlestick for Thursday. This is the third straight bearish candlestick.
The Lower Bollinger Band continued to slowly fall while the Upper Bollinger Band is starting to turn lower again.
A potential concern even for short-term trades could be the 21 day moving average falling below the 50 day. Looking at the chart and the rate of decline by the 21 day, we could see this happen by the start of next week. If that happens, it will be a short-term down signal.
Meanwhile the 50, 100 and 200 day moving averages are climbing. These are bullish signals.
Overall the SPX chart is still more bullish than bearish but as you can see below, bearish signals are once more, starting to appear as the index fails to break higher.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged 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 Friday May 28 2021. On Wednesday the up signal was weaker.
- 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.
- 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 tomorrow and is 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 falling.
- 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 which often indicates prices are going to make a bigger move. Based on the other technical indicators today, this signal would be negative for the market at present.
- 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:
4250 is resistance
4225 is resistance
4200 is resistance
4150 is light support
4100 is light support
4070 is very light support
4050 is light support and where the 50 day is currently residing. This would represent a 4.4% decline.
4000 is good support
3900 is support and just below the 100 day moving average.
3850 is support
3800 is support
3750 is good support
3700 is light support and just below the 200 day moving average.
3680 is light support
3600 is strong support
Stock Market Outlook for Tomorrow – Thu Jun 10 2021
For Thursday the technical indicators are turning more bearish. There are signals building that suggests the index will see negative action on Thursday.
While the outlook for Thursday is weaker with a chance for a negative close, the CPI number will probably hold sway, at least in the morning, for which way the market moves.
At present many analysts are advising investors not to worry, yet. They don’t see big jumps in the CPI number until later in the summer. Despite what happens with the CPI number and the initial move after it is released, the technical indicators are advising that the up signal which started just last week, is probably coming to an end for now, no matter what the CPI number shows. If however the CPI number shows very little change, the index will move higher on Thursday.