On Wednesday investors were back buying the index and pushing it higher. By the end of the day the index was up 48 points to 2971. By the close on Wednesday the S&P has a new confirmed up signal from the MACD Technical Indicator.
Stock Market Outlook Chart Comments At The Close on Wed May 20 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 are though more signs for the bulls with one up signal from May 1 with the 21 day moving average, back above the 50 day. On Wednesday the 21 day is turning higher and could cross above the 100 day on Thursday or Friday for another up signal. As well the S&P closed above the 200 day moving average on Wednesday, another up signal.
The Upper and Lower Bollinger Bands are also turning up which could be a signal that the Bollinger Bands Squeeze will end with the index pushing higher above the 200 day moving average. This would be a very bullish signal.
The candlestick on Wednesday is bullish for Thursday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising 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 Tuesday May 19. The up signal was confirmed today.
- 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 rising and positive.
- 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 up 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 rising.
- 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 still rising advising that we should expect prices rise.
- 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 light 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 21 2020
In the morning on Thursday the Weekly Initial Unemployment Insurance Claims may send stocks lower to start the day. However all the technical indicators are pointing higher. There are no indicators pointing sideways or lower.
The day on Thursday should end higher.