Stock Market Outlook for Thu May 20 2021 – Probable Bounce Attempt

Wednesday saw stock indexes tumble in early morning trading as the floor fell out from under Bitcoin in a dramatic plunge. As the day wore on Bitcoin recovered a large percentage of the decline and the indexes staged their own bounce. The S&P ended the day down just 12 points to end the day at 4115.

Stock Market Outlook Chart Comments At The Close on Wed May 19 2021 

The Bollinger Bands are continuing to widen which is a bullish sign. The Lower Bollinger Band is nearing the 50 day moving average. A dip below it will be bullish.

The closing candlestick for Thursday is signaling a bounce is probable for Thursday as the index slipped below the Lower Bollinger Band and the 50 day moving average before recovery above both.

The 21 day moving average is falling which is bearish. The 50, 100 and 200 day moving averages are still climbing which is bullish.

The chart is still bullish but there are continuing bearish signals showing.

Stock Market Outlook review of Wed May 19 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is negative and falling again.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday April 30 2021. On Wednesday the down signal was back gaining strength.

  • 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.

  • 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 an 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 rising signaling we could see higher prices on Thursday or Friday.

  • 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 May 20 2021 

For Thursday the index may open a bit lower following the closing rally attempt. If that happens I will be buying SPY calls as a bounce is likely on Thursday. Whether the index will hold the bounce is not clear from the technical indicators. They are mostly mixed with a number still falling lower while others are signaling a higher day ahead on Thursday. That means we should expect a bounce but a choppy day is coming up. The chance of a higher close however is reasonably good.

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