Stocks started Monday with a bounce but mid-morning the rally had “run out of steam” and stocks began to dip. By noon the index was struggling to hold the 4400 level and by the afternoon, sellers took over, especially in the final hour and sold the market lower.
It wasn’t a big loss, just down 8 points, but it was a dramatic drop from a morning high of 4422 to close at 4387 for a 35 point loss from the morning high.
Monday, the first trading day of August, fit in well with history, ending lower in what has become an overwhelmingly bad start to the month of August for more than two and a half decades.
As you’ll see in the technical indicators below, Monday’s loss of the morning high has changed the technical indicators to negative readings but it also changed the up signal in the MACD indicator to an unconfirmed down signal. Let’s take a look.
Stock Market Outlook Chart Comments At The Close on Mon Aug 2 2021
On Monday the S&P traded lower and closed at 4387. This left behind a bearish candlestick for Tuesday.
The Upper Bollinger Band has stopped climbing while the Lower Bollinger Band has moved above the 50 day moving average. Both signals are still somewhat bullish, but it would appear that a Bollinger Bands Squeeze is starting.
All the major moving averages are still climbing which is bullish. The chart remains dominantly bullish for the second trading day of August.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is still rising and 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 Mon Jul 26. On Mon Aug 2 2021 an unconfirmed down signal was seen at the end of the day.
- 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 for a fifth straight day.
- 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 down signal in place and is still 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 and Resistance Levels To Be Aware Of:
4400 is resistance
4370 is resistance
4350 is light support
4300 is light support
4290 is light support
4270 is light support
4250 is light support
4225 is light support
4200 is light support
4175 is light support
4150 is light support
4100 is good support
4070 is light support
4050 is light support
4000 is good support
3900 is support
3850 is support
3800 is support
3750 is good support
3700 is light support
3680 is light support
3600 is strong support
Stock Market Outlook for Tomorrow – Tue Aug 3 2021
For Tuesday the technical indicators are quite negative with only momentum still rising. MACD issued an unconfirmed down signal. In the chart the Lower Bollinger Band has moved above the 50 day which is often a bearish signal. Historically the first couple of weeks of August have been negative.
On the index, 4370 and 4400 have remained as resistance levels. That could mean on Tuesday we will see the index slip to 4370 and then try to stage another bounce.
Overall the indicators are bearish and historically for 2021, when all the indicators have been bearish, investors should watch for a bounce. Monday’s bounce was expected. Tuesday should see the index slip again but then attempt a second bounce.