Mon Apr 15 2019 saw the S&P retest the 2900 level several times intraday. Each time buyers returned, but volumes were light which made the rallies weaker and somewhat suspect. With earnings now starting in earnest it may provide what the market can rely on to push higher and challenge the 52 week high, but on Monday we saw that companies that fail to meet earnings expectations can expect to see their stock crushed. This will make the move up, choppy.
Stock Market Outlook Chart Comments At The Close on Mon Apr 15 2019
The S&P closed above the 21 day moving average again on Monday but note how for over two weeks the index is leaving behind small candlesticks which often have neutral to bearish sentiments. Today’s close for example left behind a bearish candlestick. The SPX continues to have trouble because volumes are low and buyers are selectively buying the dips but selling again on rallies. This is a tough environment to build a stable uptrend against.
The Bollinger Bands Squeeze has ended but note that the Lower Bollinger Band, while it has turned back down, is continuing to follow the market move rather than drop away. This is often bearish.
All major moving averages are back where they belong and the 50 day and 100 day are both moving away from the 200 day.
The chart looks fairly bullish but it is not as strong as mid-March was after the dip around March 10. What the index lacks is conviction of buyers and it shows in the tiny candlesticks at the close of each day. These signify tight trading ranges and buyers and sellers committing to making profits on small moves in stocks. Few investors are buying and holding with the belief of a bigger upturn about to come. Instead they take profits as they see them.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is 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 Tuesday April 2. It lost more strength on Monday.
- 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 positive and 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 an up signal in place for a second day and is 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 falling.
- 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.
- 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 Resistance Levels To Be Aware Of:
2900 is strong resistance
2860 is light support
2830 is light support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is 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 of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Tue Apr 16 2019
Tuesday will be choppy again. Trading will be within a tight trading range. The index is struggling to hold the 2900 level and then looking for buyers to push beyond the 2900 level.
Buyers lack conviction and are therefore trading stocks rather than holding and waiting for a more significant move in a stock.
A lot of the technical indicators are falling back. They have not turned negative, but instead are signaling continued weakness.
We will see more testing of the 2900 level and without buyers Tuesday will be another day of a weak attempt to advance higher.
With Netflix poised to report earnings after the bell on Tuesday, we will probably see the index trade sideways ahead of those earning. This sideways trading has a slight bias to the upside.
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