Stock Market Outlook for Thu Oct 22 2020 – Weakness and Lower Despite A New Up Signal

On Wednesday the market once again saw a rally cut down into the close with the S&P ending the day down 7 points to 3435.

Stock Market Outlook Chart Comments At The Close on Wed Oct 21 2020 

On Wednesday the index slipped slightly but the loss of the earlier rally left behind a closing bearish candlestick for Thursday thanks to news of no stimulus bill gaining traction.

The Upper Bollinger Band is still turning higher and the Lower Bollinger Band is starting to rise which at present is bearish.

The 200, 100 and 50 day moving averages are climbing.

The 21 day moving average is also still turning higher and moved above the 50 day on Wednesday which is a new up signal for the index.

Despite the new up signal, the chart is continuing to hold a more bearish overtone. On Thursday it could slip down to the 50 and 21 day moving averages, which would be more bearish for the market.

Stock Market Outlook review of Wed Oct 21 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling but 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 almost gone. Tomorrow we will probably see a down signal.

• 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.

• 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.

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 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:

3600 is resistance

3500 is resistance

3450 is 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 22 2020 

For Thursday, the technical indicators are pointing to further weakness culminating in another day of losses for the index.  We will probably also see a new down signal tomorrow from MACD which is one of the more accurate predictors of market movement.

Any positive news on a stimulus bill will get a bounce but until then the outlook remains lower.

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