The rally continued and was stronger than anticipated on Monday.With investor sentiment running high for a reopening of businesses, buying pushed the index to 2878 back to the April 17 high. This is the highest level in the recovery rally to date.
Stock Market Outlook Chart Comments At The Close on Mon Apr 27 2020
The SPX chart continues to be bearish with 6 sell signals in the chart. On Monday the index closed above 2800 again and matched the April 17 high. This is bullish.
The 200 day moving average is still leading the market, which is typical in a bear market. It is followed by the 100 day and the 50 day. The 50 day is falling quickly but the 200 and 100 day are dropping but not quickly which indicates plenty of buying is happening by investors. The 21 day is still turning back up and is above the 2725 valuation which is bullish. This break above 2725 should set the index up to break through 2900.
The closing candlestick on Monday is bullish for Tuesday but also warns there could be a morning drop. The Upper Bollinger Band is turning back up while the Lower Bollinger Band is turning sideways. We may not see a Bollinger Bands Squeeze unless the index slips back below 2800 tomorrow or Wednesday. Overall there are some encouraging signs of the index continuing to build strength to tackle 2900.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and still positive.
- 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 March 26. The up signal was stronger on Monday, the first time it has risen in days.
- 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 rising and positive.
- 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 the place for a second day.
- 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.
- 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 back warnings that prices may not rise as 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:
2900 is resistance
2860 is resistance
2840 is resistance
2800 is resistance
2725 is light support
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Tue Apr 28 2020
For Tuesday, the technical indicators have gained more strength following the rally continuing on Monday. The only dissenting technical indicator is the Rate Of Change which warns that prices are not going to rise. However MACD has finally moved stronger again, the first time in days that this technical indicator has increased. All the other technical indicators are showing strength and pointing higher.
The closing candlestick on Monday agreed to some degree with the Rate Of Change and indicates that while the bulls are still in charge, investors should be aware that a dip could occur probably in the morning on Tuesday. Overall though, Tuesday looks to still end higher even if only slightly.