On Wed Sep 26 2018 the Fed announced another quarter point interest rate increase. This is the eighth increase since 2015 and the Fed indicates there are more to come, one as early as December seems likely. Yet it was comments from Fed Chair Powell regarding a lack of inflation that caught the attention of investors and sent stocks lower. Bank stocks particularly fell back on the news. All three indexes closed lower after being positive during the day before the Fed announcement.
Stock Market Outlook Chart Comments At The Close on Wed Sep 26 2018
The S&P fell back to 2905 by the close. This places it just above the 21 day moving average. It closed below the Upper Bollinger Band but the late day drop left behind a bearish candlestick for Thursday.
The 21 day moving average is continuing to climb.
The Lower Bollinger Band continued above the 50 day moving average and is now into a Bollinger Bands Squeeze.
All the major moving averages are continuing to climb. Overall the S&P chart still has a bullish outlook but there are furthersigns there could be a deeper dip down to the 21 day moving average this week.
Stock Market Outlook review of Wed Sep 26 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is still positive but falling.
- 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 Sep 20. Today the day ended with an unconfirmed 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 signal is now negative and still 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 still has a down signal for Thursday and is slightly 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 moving lower.
- 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 moving lower.
- 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 Levels To Be Aware Of:
2860 is light support
2830 is light support
2795 is light support
2745 to 2750 is light support
2725 is light support.
2700 is 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 Sep 27 2018
Often the lack of an overbought market and a steep drop as we saw in the final hour on Wednesday can set the market up for a bounce on the following day.
There are some stronger indications of more weakness to come for stocks as MACD issued a new sell signal, albeit an unconfirmed one. The Slow Stochastic is still showing a down signal.
The Ultimate Oscillator turned negative today.
The other 3 indicators are all moving lower, but we could see a bounce attempt.
For Thursday stocks look like they will open flat and try to move higher before selling back down. The close looks sideways but most likely negative. Once stocks move down, we will see them move back up again. This could take a couple of days or even into next week, but there was not anything in the Fed report that should send stocks tumbling. Wednesday was just one of those days when investors start selling and that drags in more sellers who fear they should be getting out as well. Thursday will be choppy.
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