Stock Market Outlook for Tue Apr 12 2022 – Bias Is Lower But Nearing Short-Term Oversold

Monday started lower and quickly fell to support at 4430. After spending the majority of the day trying to bounce off support, sellers took charge in the final hour and volumes rose as the index plunged another 30 points to end the day at the lows. The S&P lost 75 points to close at 4412.

This was a loss of 1.7% for the S&P but once again on Friday the NASDAQ lost more, falling 2.18% dropping another 299 points to end the day at 13411.

Let’s review Monday’s closing technical indicators to see what to expect for Tue Apr 12 2022.

Stock Market Outlook Chart Comments At The Close on Mon Apr 11 2022 

The 21 day moving average continued to climb above the 50 and 200 day moving average and ended the day just above the 100 day moving average. This is not yet a second up signal as the 21 day didn’t break enough above it.

As well the 50 day moving average is moving away from the 200 day which is also bullish and the 100 day is still trending sideways, which is also bullish.

The closing candlestick on Monday however closed at the 200 day moving average having now fallen below the 100, 21 and 50 day moving average. The closing candlestick also signaled that the SPX is becoming oversold, but it may take another day of selling before a bounce, or certainly not until later in the day on Tuesday.

Meanwhile the Upper Bollinger Band in still turning lower and the Lower Bollinger Band is turning sharply higher. This is bearish. If this continues we could see a Bollinger Bands Squeeze this week.

The 200 day moving average is back at the 4400 level which is bullish.

The SPX still has 4 down signals in place and 1 up signal.

The chart is about 80% bearish and 20% bullish for Tuesday.

Stock Market Outlook review of Mon Apr 11 2022

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling 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 Friday April 8. On Monday the down signal was confirmed. The histogram is strongly negative.

• 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 and almost negative.

• 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 strong down signal in place and touching oversold readings.

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 and 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 falling indicating further changes in pricing should be expected.

• 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:

4650 is resistance

4640 is resistance

4625 is resistance

4600 is strong resistance

4590 is resistance

4575 is light resistance

4560 is light resistance

4550 is light support

4525 is light support

4500 is support

4490 is light support

4475 is light support

4450 is light support

4400 is support

4370 is light support

4350 is light support.

4300 is good support

 Stock Market Outlook for Tomorrow – Tue Apr 12 2022 

For Tuesday the market moving event is the Consumer Price Index. On Monday the one year inflation expectation rose to 56.6% from 6% a month earlier but the three-year outlook fell to 3.7% from 4.2% six months earlier. The Consumer Price Index on Tuesday could tumble stocks at the open.

Stocks are entering oversold readings but not deeply. There is still plenty of room to the downside. The S&P ended at 4412 just above good support at 4400 but that support is set to break on Tuesday.

The outlook is for a morning tumble lower, and then either later on Tuesday a bounce attempt or on Wednesday a bounce attempt as the index becomes a bit more oversold. For now though, the bias is lower.

I bought SPY calls at the end of the day on Monday. If there is no bounce I may average them lower waiting for a potential bounce either later on Tuesday or perhaps on Wednesday. Meanwhile with the confirmed down signal from MACD, more downside even after a bounce either late Tuesday or on Wednesday, should be expected.

Potential Market Moving Events

Tuesday:

8:30 Consumer Price Index

8:30 Core CPI monthly and year-over-year

12:10 Fed Governor Brainard speaks

2:00 Federal Budget Deficit

6:45 Richmond Fed President Tom Barkin speaks

Wednesday:

Producer Price Index

Thursday:

8:30 Initial Jobless claims and continuing jobless claims

8:30 Retail sales

10:00 University of Michigan consumer sentiment index

10:00 University of Michigan inflation expectations

10:00 Business Inventories

3:50 Cleveland Fed President Mester speaks

6:00 Philadelphia Fed President Harker speaks

Friday:

8:30 Empire state manufacturing index

9:15 Industrial production index

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