Stock Market Outlook for Thu Mar 2 2023 – Oversold, Lower and Then Bounce Likely

Wednesday saw stocks continue their move down with another lower dip intraday and then a spike in the final hour of trading to retake the 3950 technical support level. Each day we have seen the same weakness and the same small intraday bounces. This market reminds me of a number of times in the late 1970’s and in the 1980’s. It won’t take much to get a bounce back above 4000 but at present investors want to see inflation begin to dip or the economy weaken. They continue to hope that a weaker economy will slow further Fed rate increases. That could be the catalyst the market needs to begin a recovery.

The SPX lost 18 points to close at 3951.

The NASDAQ lost 76 points to 11379.

Let’s review the closing technical indicators from Wed Mar 1 to see what we should expect for the second trading day of March 2023.

Stock Market Outlook Chart Comments At The Close on Wed Mar 1 2023 

On Wednesday the index closed above the Lower Bollinger Band but below all major moving averages. This is bearish.

The closing candlestick is bearish but once again it also is signaling a strong possibility of a bounce attempt on Thursday.

The Upper Bollinger Band is turning higher which is bullish while the Lower Bollinger Band is turning lower which is bearish.

The 200 day moving average is rising which is bullish. The 21 day is falling which is bearish. The 50 day moving average is falling and is just below the 100 day for a new down signal.

At present there are now 3 down signals in place since April 24 and 4 up signals since Jan 13. We need to see the 50 and 100 day moving averages climb above the 200 day.

In the chart you can see that while the index is continuing to drift lower, the S&P is still above that start of January which was 3800.

The chart is 70% bearish for Thursday and points to a possible jump as oversold signals continue to rise.

Stock Market Outlook review of Wed Mar 1 2023

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and negative. It is at oversold levels where often we see a bounce.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) down signal was almost unchanged on Tuesday. The MACD histogram also remained strongly negative but is not increasing. There are signs that the strength to the downside is not gaining more traction.

• 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 and negative.

• 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 and is in oversold levels. Normally we should expect a bounce in the SPX.

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 into oversold 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 and negative. Often this means a bounce is in the works.

• 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

4220 is resistance

4200 is resistance

4180 is resistance

4150 is resistance

4125 is resistance

4100 is resistance

4090 is resistance

4075 is resistance

4050 is resistance

4030 is resistance

4025 is resistance

4000 is light support

3975 is light support

3965 is light support

3950 is good support

3930 is light support

3900 is good support

Stock Market Outlook for Tomorrow – Thu Mar 2 2023 

The technical indicators continue to show oversold readings and are at levels where a bounce could happen at any time. The MACD down signal has not gained any further strength in days. This indicates that the market is drifting lower which is often a bullish sign a bounce is coming.

There is an old saying among investors to “not short a dull market”. That could apply to the present trend.

The S&P chart is biased to the bearish side but the closing candlestick strongly point to a potential bounce and the technical indicators are in agreement that a bounce is near.

On Thursday investors could see stocks slip further at the open but then try a bounce to move back to 3975 or 3985. From there the index has a chance to close positive but below 4000.

Potential Economic and Political Market Moving Events

The weekly initial unemployment insurance claims are out on Thursday. Analysts believe they will rise slightly to 197,000.

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims

8:30 productivity

8:30 unit-labor costs

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