With news before markets opened that trade talks with China were ongoing, the futures before the open reversed course from being down over 200 points on the Dow to being up 200 points. The open saw all 3 indexes jump.
By the close, the S&P had recovered not quite half of what was lost on Friday. There are signs though that the rally on Monday though could be just a bounce.
Stock Market Outlook Chart Comments At The Close on Mon Aug 26 2019
One of the more important signals on Monday was the steady decline of the Upper Bollinger Band which turned decidedly lower on Monday. With the Lower Bollinger Band trying to rise, we could see a Bollinger Bands Squeeze this week.
The 21 day moving average continues to decline and is ready to drop below the 100 day moving average. This would be a second major sell signal if it occurs.
The closing candlestick is bullish but at times it can also be a reversal signal.
The 50 day moving average is still falling while the 100 day moving average which has been moving primarily sideways, is starting to fall below the 2900 valuation. The 200 day moving average is still climbing.
Overall the index looks poor for Tuesday but there are still some signals that are bullish so Tuesday might see a further attempt to move higher.
Stock Market Outlook review of Mon Aug 26 2019
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 Thursday July 18. On Friday MACD was back to a sell signal. On Monday the sell signal continued. On July 18 the index closed at 2995.11. Since then the index has continued to be weak.
- 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 negative but turning sideways.
- 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 signal has a down signal in place.
- 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 moving sideways.
- 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:
3000 is resistance
2960 is light resistance
2900 is light resistance
2860 is light support
2840 is 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.
Stock Market Outlook for Tomorrow – Tue Aug 27 2019
Monday the market rebounded which is typical after a big sell-off but the bounce remains suspect. The problem with Friday’s drop was that it was an overreaction to an escalation to the trade war with China. Monday’s bounce was a reaction to news that trade talk are continuing with China, or so investors were told although Chinese reps seemed to deny any talks were ongoing.
Technically the signals are somewhat split but no where near as poor as they were on Friday by the close.
Signals though do remain more bearish than bullish and that keeps the bounce on Monday suspect. We will know soon enough.
The indicators are pointing to a continuation of the bounce on Tuesday although the open looks weak. From there we could see the rally dip back in the afternoon and the market close either slightly higher or lower.
Wednesday may end up being more important than Tuesday for the market direction as we should have a clearer outlook by Wednesday.
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