Wednesday finally saw the oversold bounce we have waited for. The S&P closed up 71 points to 3979. The NASDAQ closed up 247 points to close at 11,791. Market breadth on Wednesday was strongly positive but much of the bounce was technical based on stocks being deeply oversold.
Let’s review the closing technical indicators from Wednesday to see if the rally can be continued into Thursday.
Stock Market Outlook Chart Comments At The Close on Wed Sep 7 2022
The closing candlestick indicates that we saw a bearish bounce off an oversold condition. The closing candlestick is still bearish.
The candlestick closed once again below all major moving averages.
The Bollinger Bands are indicating two possible outcomes. The Upper Bollinger Band is pointing to stocks rising while the Lower Bollinger Band is still pointing to stocks falling.
The 21 day moving average is falling further away from the 200 day. This is bearish.
The 200 day and 100 day moving averages are also falling which is bearish.
The first up signal since April was released Tuesday Aug 2 when the 21 day moving average crossed above the 50 day moving average.
The 21 day moving average moved above the 100 day moving average on Wed Aug 16 for a second major up signal.
The 50 day has been rising but is now turning sideways and could begin to fall shortly unless the index can stage a rally or a bounce.
There are now 2 down signals still in place and two up signals.
The chart is 75% bearish for Thursday.
Stock Market Outlook review of Wed Sep 7 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Wednesday the down signal remained strong. The histogram also remained strongly negative. Both are bearish 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 rising and no longer oversold.
- 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 and is deeply 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 rising and no longer oversold.
- 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 and 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:
4250 is stronger resistance
4220 is light resistance
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is light support
3925 is light support
3900 is strong support
3875 is light support
3850 is good support
3825 is light support
3810 is good support
Stock Market Outlook for Tomorrow – Thu Sep 8 2022
For Thursday the technical indicators and the S&P chart pattern are not nearly as bearish or as oversold following Wednesday’s bounce. The candlestick at the close warns though that Wednesday was a bounce and there is a good chance for some further negative closings.
September has a poor history for stocks especially the second half of the month.
For Thursday the outlook is for stocks to try to continue the bounce but to remain for the most part bearish. After the close on Thursday we should have a better idea what to expect for the following week. For now, I am taking profits and closing many positions early. Thursday could end higher which would be positive for stocks, but for now, it is best to stay cautious for the next couple of days.
Potential Market Moving Events
There are not many further economic events that will immediately affect markets this week. Here are the two most important events for Thursday. I am not expecting anything new from the Fed Chair who speaks on Thursday.
Thursday:
8:30 Weekly Initial Unemployment Insurance Claims are estimated to be 235,000 which is slightly higher than the prior week.
9:10 Fed Chair Powell speaks
Stock Market Outlook Archives
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Stock Market Outlook For Fri May 1 2026 – Overbought But Higher
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Stock Market Outlook For Thu Apr 30 2026 – Dips Likely Possible Lower Close
Morning Investing Strategy Notes for Wed Apr 29 2026
Stock Market Outlook For Wed Apr 29 2026 – Choppy But Higher Ahead Of More Earnings
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