Wednesday March 20 saw the Fed issue a surprisingly transparent blueprint for the year which included no interest rate hikes. Investors jumped into stock immediately after the announcement on interest rates but then paused. That brought in sellers who pushed back and despite the accommodative stance of the Fed, the indexes slipped lower. The S&P closed down slight while the NASDAQ held onto a small gain to close positive.
Stock Market Outlook Chart Comments At The Close on Wed Mar 20 2019
The S&P now has 5 up signals in place and looks set for the 50 day moving average to move back the 200 and 100 day and reclaim the lead. This will setup a 6th up signal and re-establish the bull pattern for the S&P index.
The closing candlestick on Wednesday however is bearish for Thursday.
The index also closed above the 21 day moving average for the eighth day.
The Bollinger Bands Squeeze is showing some signs of starting to unwind.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Thursday February 28 2019. Yesterday, Tue Mar 19 2019 the MACD issued an unconfirmed up signal and today it was not confirmed. Instead the signal looks set to issue another down signal on Thursday, if stocks move back lower.
- 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 signal is positive but 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 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 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 falling back indicating investors should expect a decline in prices.
- 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 Resistance Levels To Be Aware Of:
2900 is strong resistance
2860 is resistance
2830 was light support and will be light resistance
2800 is strong resistance and may become support shortly.
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Thu Mar 21 2019
The technical indicators are far less bullish. With two sell signals still in place and only one indicator even rising, the technical picture is pointing to more downside ahead for Thursday, and/or Friday this week.
The Fed stance on no interest rate hikes for 2019 should move markets higher, but that may not be the case on Thursday. With so many technical indicators turning bearish we should expect the markets to move sideways, enter a strong choppy day and turn lower by the close. I am not expecting much move to the downside but weakness is definitely dominant for Thursday.
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