With Treasury yields climbing on Wednesday, stocks ran into sellers. The end of the day saw the S&P close with slight losses, down 25 points at 3695. The NASDAQ closed down 91 points but remains up 359 points on the week.
The Fed’s Beige Book provided nothing new for investors and it was primarily a non-event.
For Thursday, the mixed results from Tesla’s earnings may be an excuse some investors use to sell out of the stock. For that reason, the opening will be weaker on Thursday.
Let’s review Wednesday’s closing technical indicators to see what to expect for Thu Oct 20 2022.
Stock Market Outlook Chart Comments At The Close on Wed Oct 19 2022
On Wednesday the S&P closing candlestick is bearish and closed at the 21 day moving average. The candlestick again has long shadows which signals Thursday will again be choppy. The candlestick is advising we could see a bounce attempt on Thursday.
The Bollinger Bands Squeeze . That squeeze outlook is still unknown.
The 21 day moving average continued its descent.
The Upper Bollinger Band continued falling and is below the 50 and 100 day moving averages. This is bearish.
All the moving averages are still falling which is bearish.
There are now 7 down signals in place since April and no up signals.
The chart is 80% bearish for Thursday.
Stock Market Outlook review of Wed Oct 19 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- 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 Oct 16. On Wednesday the up signal gained strength. The histogram also gained strength.
- 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 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. It is no longer showing oversold.
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 and positive.
- 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 rising slightly but still negative.
- 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:
3800 is resistance
3775 is light resistance
3750 is light resistance
3730 is light resistance
3700 is light resistance
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
3585 is light support
3550 is good support
3530 is light support
3515 is light support
3500 is good support and is a decline of 27%
Stock Market Outlook for Tomorrow – Thu Oct 20 2022
The earnings disappointment from Tesla will probably set the day up for a negative open. The technical indicators are still supporting a higher move in the S&P for Thursday. MACD is gaining strength not losing it. But since the big rally on Tuesday was sliced in half, the up bias has weakened considerably.
Thursday should see the index attempt another bounce but even with the technical indicators supporting the outlook higher, the SPX chart is still looking ugly. Thursday has a good chance of ending lower again.
Keep an eye on the dollar and the 10 year Treasury rates. If they continue to climb and if the 10 year moves above 4.25% the rally may end abruptly.
Potential Market Moving Events
This week on Wednesday investors get the Fed’s Beige Book at 2:00 PM. Often that moves markets. On Thursday we get the Weekly Initial Unemployment Insurance Claims and on Friday we get inflation expectations.
Wednesday:
8:30 Building Permits surprised and rose to 1.56 million.
8:30 Housing starts slipped slightly to 1.44 million which is still a very strong number.
2:00 Fed’s Beige Book provided nothing new for investors. The outlook is unchanged.
Thursday:
8:30 Weekly Initial Unemployment Insurance Claims
8:30 Philadelphia Fed manufacturing index
10:00 Existing home sales
10:00 Leading economic indicators
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