On Wednesday investors returned to selling and sent the index lower throughout most of the day. The close was particularly brutal with markets wiping out Tuesday’s rally and ending at the lowest level since June.
Stock Market Outlook Chart Comments At The Close on Wed Sep 23 2020
On Wednesday the selling sent the index back to the 100 day moving average. Normally we should expect a bounce after such a large move down to an important technical indicator but any bounce on Thursday, which is unlikely, will not last. The market remains intent on testing the 200 day moving average which is around 3130 at present.
A new sell signal occurred today with the Lower Bollinger Band falling to just below the 100 day moving average.
The closing candlestick is bearish for Thursday. Any rally attempt is an opportunity to get out of trades and buy put options for another move lower.
The index has now been trading below the 21 day moving average for 12 straight days without being able to climb back above it. This remains a strong bearish signal.
The 21 day moving average is still turning sharply lower.
The 50, 100 and 200 day moving averages are still climbing. There are still 6 up signals and three down signal caused when the Lower Bollinger Band moved above the 100 day moving average back on July 27 and on Aug 31 above the 50 day. The third signal occurred today with the Lower Bollinger Band falling below the 100 day moving average. The SPX chart is bearish as it moves lower away from the 50 day moving average.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Sep 4. On Wednesday the down signal was stronger and reaching oversold signals.
- 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 and is 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 back into oversold readings.
- 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:
3600 is resistance
3500 is resistance
3450 is resistance
3400 is resistance
3375 is resistance
3300 was 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 Sep 24 2020
For Thursday the technical indicators all pointing lower for the index despite oversold signals. Any bounce on Thursday is highly suspect of drawing in investors only to sell lower.
The next level looks like the index will break below the 100 day and head to the 200 day moving average as investors remain fixated on increasing covid cases and what they perceive as a growing risk of a second shut down or partial shutdown of the country.