Wednesday saw the ADP report released showing the largest number of jobs lost since ADP records have been kept. 20.2 million jobs were lost from the private-sector in April due to the economic shutdown. The market originally took the news in stride and opened at 2890. That though was the high for the day and twice the index tried to break higher but was met by sellers. Late in the afternoon sellers pushed back harder and buyers moved lower letting the index fall to close down 20 points for a negative loss of three-quarters of a percent. The S&P ended the day at 2848.
Stock Market Outlook Chart Comments At The Close on Wed May 6 2020
The SPX chart continues to be bearish with 6 sell signals in the chart. There is also one up signal from May 1 with the 21 day moving average back above the 50 day. The 21 day is still climbing and is pushing to try to move to the 100 day moving average.
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 rapidly.
The closing candlestick on Wednesday was bearish for Thursday. The market has entered a Bollinger Bands Squeeze which you can see in the chart. Indications in the chart are for the index to slip lower as the Upper Bollinger Band is falling quickly.
The index closed above the 21 day moving average and just below 100 day moving average. The 2800 level continues to hold the market up followed by light support at 2725.
Stock Market Outlook review of Wed May 6 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling but still 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 Thursday March 26. The up signal was once again weaker on Wednesday with a reading of just 4.56
- 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 neutral 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 also falling.
- 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:
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 7 2020
For Thursday the market is drifting in a sideways pattern more than it is moving up or down. It cannot break free of the current trend and does not have enough buyers to move convincingly above 2900.
The technical indicators keep shifting from up to down and then to sideways. However the Moving Average Convergence / Divergence indicator has been steady in its readings and those have been declining to the point where if the market does not move higher over the next couple of days, MACD will issue a down signal.
Thursday could see stocks try to rally, especially later in the day, ahead of the Friday April jobs numbers. That’s because some investors hope the number will not be as bad as analysts expect with at least 15 million unemployed estimated. If the number is less on Friday the index will rally but if it is higher on Friday, the index will slip lower. Analysts expect the April jobs numbers to be the worst report either since the Great Depression or since records have been kept. A smaller number think the numbers will be more on a pare with the October 2008 credit crisis jobs numbers which reached a total of 10.1 million.
For Thursday I am expecting much of the same with the outlook primarily sideways with perhaps a very slight up bias, until we get the jobs numbers on Friday.
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