Monday saw the S&P open and push higher but by 11:00 the rally was over and the index spent the rest of the day falling. By the close the SPX was down just 5 points at 4140 but it was third straight day of the rally being unable to push higher.
The NASDAQ saw weakness thanks in large part to a drop in NVIDIA Stock (NVDA) as the company reported next quarterly earnings would be considerably lower than expected. The index closed down just 13 points to 12,644 but the semiconductor sector saw wide spread selling.
Let’s review the closing technical indicators from Monday to see what to expect for Tue Aug 9 2022.
Stock Market Outlook Chart Comments At The Close on Mon Aug 8 2022
The closing candlestick is bearish for Tuesday. The index reached the 200 day moving average and then fell back. It still closed above the 100 day moving average.
The 21 day moving average is still rising and is above the 50 day for a fifth day. The 50 day moving average is also turning higher. Both are bullish.
The first up signal since April which was released Tuesday Aug 2.
The Upper Bollinger Band is rising and continued to move above the 200 day moving average which is bullish.
The Lower Bollinger Band is trending sideways which is bullish.
The 200 and 100 day moving average are still falling which is bearish.
There are 3 down signals still in place and one new up signal.
The chart is 80% bullish for Tuesday. This is the same bullish percentage we saw both Thursday, Friday and Monday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged 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 Monday June 27. On Monday the up signal weakened. The histogram also weakened. Both are still bullish but the strength of the signals is starting to wane.
- 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.
- 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 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 but still in overbought readings.
- 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 unchanged.
- 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:
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light support
4000 is light support
3975 is light support and is a decline of 17.5%
3900 is light support and is a decline of 19%
3850 is light support and is a decline of 20%
3825 is light resistance.
3800 is good support.
3775 is light support
3750 is light support
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Tue Aug 9 2022
For Tuesday the S&P chart is once again 80% bullish, for a fourth straight day. Often we can expect to see the index break and move higher but the technical indicators are mixed and none are pointing higher as of Monday’s close.
The chart itself is more bullish than the technical indicators. MACD continues to lose strength but it is still at fairly bullish readings.
Overall the signals are still more bullish than bearish. The technical indicators though are showing further weakness. The MACD signal has been losing strength for two days. For Tuesday dips are again likely. The morning may open higher but dips should be expected. There is a better chance of another lower close but the index is doing a good job of hanging on above 4100. That means investors should not be surprised if the SPX pushed and closed at or above 4175 on Tuesday despite the more bearish outlook.
Potential Market Moving Events
This week we get some inflation numbers on Monday, Wednesday and Friday. Those could cause some market gyrations.
11:00 NY Fed 3-year inflation outlook. Previously it was 3.6%. The reading came in at 3.2%.
8:30 Unit Labor Costs