All three indexes made new all-time highs on Wednesday and markets are now extremely overbought. You can see in the chart below that the candlestick for tomorrow is pointing to a very overbought market. The NASDAQ pushed above 12000 and the S&P is nearing 3600 after quickly blasting through 3500 just days ago. The Dow Jones roared higher by 454 points to 29,100. In the final hour of trading volumes picked up and there were signs of almost panic like buying. Usually this signals a potential short-term top. Analysts referred to the market action as “crazy” into the close. Let’s look at the technical analysis below to see what it can possibly tell us about tomorrow.
Stock Market Outlook Chart Comments At The Close on Wed Sep 2 2020
On Wednesday the closing candlestick is bullish following a fourth close higher above 3500 but it also signaling very overbought and almost always we will see a dip the next day or two or at least sideways action.
The 50 day is continuing to try to climb above the Lower Bollinger Band which would keep the rally alive.
There are still 6 up signals and two down signal caused when the Lower Bollinger Band moving above the 100 day moving average back on July 27 and on Aug 31 above the 50 day. Today the 50 day stayed just above the Lower Bollinger Band.
The 21, 50, 100 and 200 day moving averages are continuing to climb. The SPX chart is still very bullish.
Stock Market Outlook review of Wed Sep 2 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an signal on Monday Aug 24. That signal was stronger on Wednesday.
- 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..
- 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 neutral signal in place and is still very 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 rising and extremely overbought.
- 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 indicating we should expect a change in prices.
- 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 Sep 3 2020
Normally investors should expect some downside action on Thursday but momentum from buyers is very strong. A lot of investors who missed the recovery rally are jumping into stocks that are rallying and pushing them higher. While many investors find the market “crazy” at some point it will straighten out but until then, Thursday still shows signs that the day could end higher.
Investors though should be prepared to take some profits and dips on Thursday could be deeper than expected but that has not been the case in the past. Instead we have seen every little dip find buyers within minutes. Those stocks leading the rally that take a dip are snatched up.
Stay cautious but overall the bulls are still ready to push higher and the S&P could brush against 3600 on Thursday but a close that high is extremely unlikely. Instead a flat to slightly higher or lower market is expected.
Stock Market Outlook Archives
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