Weakness continued on Wednesday as all three indexes pulled back. The S&P tested the 2800 support level three times during the day. The strongest push lower was late in the day but the dip down to 2793 found ready buyers and the close saw steady buying push the S&P to 2820. The loss was 1.7% on Wednesday which marked a second straight day of fairly large losses. The close saw the important MACD technical indicator issue an unconfirmed down signal. This is the first signal change since March 26 when MACD issued a market up signal.
Stock Market Outlook Chart Comments At The Close on Wed May 13 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and a Bollinger Bands Squeeze that is still underway. There is one up signal from May 1 with the 21 day moving average, back above the 50 day.
The closing candlestick was bearish for Thursday. As well the index closed below the 200, 100 and 21 day moving averages.
The 200 day moving average is still leading the market, which is typical in a bear market. It is still followed closely by the 100 day. The 50 day is continuing to fall while the 21 day is moving higher but is turning sideways and does not look like it will climb much further at present.
The Bollinger Bands Squeeze is underway and is showing signs the index may move lower out of the squeeze. The Lower Bollinger Band is above the 50 day and the Upper Bollinger Band is at the 200 day, both of which are normally bullish in a rally. While the chart is still bearish there are growing signs that the lows of March may not be revisited unless a new catalyst to the downside should appear.
Stock Market Outlook review of Wed May 13 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and turning negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an unconfirmed down signal on Wed May 13 2020. The down signal has to be confirmed.
- 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 falling 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 strong down signal in place.
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 indicating lower prices may be seen shortly.
- 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:
3000 is strong resistance
2950 is resistance
2900 is resistance
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Thu May 14 2020
The new down signal from MACD is not yet confirmed but it looks convincing enough for a down day on Thursday. We could see a bounce attempt in the morning but it won’t move very high and won’t last long.
The technical indicators continue to shift to the negative side of the market and the bias is quickly shifting to a down move. Thursday will end the day lower for the S&P.
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