Monday’s action was very bearish but it also pushed the index to the 200 day moving average, broke a number of support levels and left the index deeply oversold. It also was the worst day for the index in 2019.
Stock Market Outlook Chart Comments At The Close on Fri Aug 2 2019
The SPX chart is bearish. The index opened below the 100 day and fell to below the 200 day intraday in the afternoon on Monday. It closed at the 200 day MasterCard Stock (MA). We should see a bounce attempt off the 200 day.
The closing candlestick is bearish but also is often seen just before a bounce.
The index closed and traded all day below the Lower Bollinger Band.
The Bollinger Bands Squeeze is over with both the Upper Bollinger Band and Lower Bollinger Band moving in opposite directions.
Meanwhile all the major moving averages are still climbing and the 100 day is almost ready to break above 2900 which will add support to the SPX.
Stock Market Outlook review of Mon Aug 5 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling into strong oversold signals that usually signify a bounce.
- 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. The down signal was very strong 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 negative and falling. It is near oversold signals.
- 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 for Tuesday and is oversold.
- 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 is now signaling oversold. It is at very deep levels which are almost always followed by a bounce.
- 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 and signaling investors should prepare for a bounce.
- 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 support
2860 is better 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.
Stock Market Outlook for Tomorrow – Tue Aug 6 2019
The selling on Monday was very overdone. Tuesday will see the markets try to bounce higher. The bounce will fail and a lower close is likely. Nonetheless, a bounce back up even if only for a few days will assist the indexes.
All the technical indicators are pointing to a high likelihood of a bounce. A test of 2825 could still be in the works for the S&P but I am not expecting the index to slip to 2800. The selling looked like it was ending, by the market action in the last 30 minutes of trading. We should see a better day on Tuesday.
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