Stock Market Outlook for Thu Oct 18 2018 – More Weakness – Bounce Possible

Wednesday Oct 17 saw stocks try to build a base of sorts, following the prior week’s sell-off and Tuesday’s massive rally. Stocks dipped in the morning with the S&P falling back to just below 2790. They recovered and ended the day down less than 1 point. It was a choppy day of trading on all 3 major indexes.

Stock Market Outlook Chart Comments At The Close on Wed Oct 17 2018 

The index closed below the 100 day moving average on Wednesday but held the 2790 level in the morning plunge.

The day though was choppy with plenty of dips and that sent the 21 day moving average down to the 50 day for a sell signal.

This left behind a bearish candlestick for Thursday.

All the major moving averages are turning lower which is bearish for the market at present.

Stock Market Outlook review of Wed Oct 17 2018

Stock Market Outlook: Technical Indicators Review:

All indicators are moving higher on Tuesday.

Momentum: Momentum is negative and moving sideways, unchanged.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday Sep 26. The signal is was weaker on Wednesday and is still showing the market as oversold.

• 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.

• 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 still has a strong up signal in place for Thursday. This is the third up signal in a row.

• 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 turned sideways on Wednesday.

• 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 falling again.

• 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 Resistance Levels To Be Aware Of:

2900 was good support – this will be strong resistance

2860 was good support – this will be resistance

2830 was light support and will be light resistance

2795 is light support

2745 to 2750 is light support

2725 is light support.

2700 is important support.

2675 is light support.

2650 is light support

2620 is light support

2600 is strong support.

There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.

The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.

 Stock Market Outlook for Tomorrow – Thu Oct 18 2018 

The Ultimate Oscillator is rising again on Wednesday and the Slow Stochastic has an up signal again in place for Thursday.

However all the other technical indicators remain pointing to weakness and further downside. The chart itself is negative for Thursday.

Thursday looks choppy with a chance of another large dip and then a rally attempt. The S&P could try to close positive but for now it looks like another day of weakness is needed for the markets to try to build a base. That said, the chance of Tuesday’s rally being given back is very slim on Thursday.

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