On Wednesday the day started with a promising bounce but when word arrived of no deal for the ongoing stimulus package, stocks sold lower. The close was a bit disappointing as the S&P broke below 3500 and ended the day at 3488, the first close below 3500 since Oct 9. A second close if it is lower would suggest the index may retest 3425. Let’s review the technical indicators from Wednesday’s close.
Stock Market Outlook Chart Comments At The Close on Wed Oct 14 2020
On Wednesday the index closed above both the 21 and 50 day moving averages and below the Upper Bollinger Band and below 3500. The closing candlestick was bearish for a second day.
The Upper Bollinger Band is still turning higher and the Lower Bollinger Band is falling lower, which is bullish.
The 200, 100 and 50 day moving averages are climbing.
The 21 day moving average is also still turning higher. If it crosses above the 50 day this week, it will be very bullish heading into the end of October.
There are still 6 up signals and 3 down signals. The SPX chart is showing signs it may stall out here but let’s see what the technical indicators are showing us.
Stock Market Outlook review of Wed Oct 14 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 Oct 1. On Wednesday the up signal was a bit weaker.
- 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 falling but still 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 down signal in place and is extremely 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 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, indicating we should not expect to see prices rise at this time.
- 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:
3600 is resistance
3500 is resistance
3450 is light support
3400 is support
3375 is support
3300 is support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
Stock Market Outlook for Tomorrow – Thu Oct 15 2020
For Thursday, the technical indicators have shifted to a more bearish outlook but they are still positive which advises that this two-day weak period is more likely profit-taking while investors continue to take a wait-and-see approach to a potential stimulus package, before the end of the month. Investors remain optimistic but by taking some profits, they are hedging their “bets” so to speak.
The down signal from the Slow Stochastic is a bit of concern as it shows the market as overbought with room to still fall back. The remaining technical indicators are all showing there is weakness but they remain positive which usually indicates this is a temporary dip.
The close below 3500 today is also a concern, but only if we get another close tomorrow that is lower than today’s close at 3488.
We could see the index test the 3450 level which is light support but there should also be a bounce off of it, should that happen.
Presently the outlook is still supportive of the bulls, but on Thursday we will probably see a weak to flat opening to start. If there is anything positive on the stimulus package, a higher, positive close will occur. Without any positive news on the stimulus package the index will end the day a lower on Thursday.
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