On Wednesday stocks extended the rally from Tuesday but this time there was no give back in the final hour. Instead stocks pushed through sellers and climbed to close at the high of the day, 3036.
Stock Market Outlook Chart Comments At The Close on Wed May 27 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and a Bollinger Bands Squeeze that is still underway. Bullish signs continue to grow. There was an up signal on May 1 when the 21 day moved above the 50 day moving average. As well the 21 day is now at the 100 day and should give an up signal on Thursday or Friday. Also in the chart the 50 day is turning back up, another good sign for the bulls.
Another bullish signal is the index closed again on Wednesday above the 200 day moving average and at above the Upper Bollinger Band. The move above the Upper Bollinger Band should begin to end the Bollinger Bands Squeeze. The Lower Bollinger Band is starting to fall back and the Upper Bollinger Band is starting to rise, both bullish signals.
The 200 day moving average is also starting to dip.
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 stronger on Wednesday.
- 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 an up signal in place and is overbought.
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 and overbought.
- 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 turned sideways indicating not a lot of price changes are expected.
- 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 light support
2900 is light support
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 28 2020
For Thursday the political events in Hong Kong and Washington may stall the rally from moving much higher. Aside from those events though, the market is still positions to move higher. If on Thursday the Weekly Initial Unemployment Insurance Claims shows a dip lower from last week, that should assist in continuing the rally which started on Tuesday.
For Thursday a higher close is still expected but dips could be a bit deeper on Thursday and could even test down to 3020 to 3010.