On Monday we saw the expected weakness as investors took profits from the massive November rally. November ended with the largest one month gain since January 1987. The index closed on Monday down 16 points at 3621.
Stock Market Outlook Chart Comments At The Close on Fri Nov 27 2020
Monday saw the index fall slightly but stay above 3600. The closing candlestick is once again bearish for the following trading day, but since Tuesday is the start of December, historically the first trading day of December has been an up day.
The Upper Bollinger Band turned lower on Monday while the Lower Bollinger Band is climbing higher. We could see a change in trend shortly as often this move by the Lower Bollinger Band sets up the index for a potential Bollinger Bands Squeeze later this upcoming week or early next. This has to be watched to be determined how it will play out.
The 21 day, 50 day, 100 day and 200 day moving averages are all rising, a bullish sign. The up signal from Oct 21 is still in play, and the chart remains bullish despite the closing candlestick and change in the Bollinger Bands.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling 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 Nov 5. The up signal on Monday continued to lose strength.
- 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 rising.
- 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 place but is almost signaling neutral. It 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 has turned lower..
- 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 also 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:
3600 is resistance
3550 is support
3500 is support
3450 is support
3400 is support
3375 is support
3300 is support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
Stock Market Outlook for Tomorrow – Tue Dec 1 2020
For Tuesday, the first day of December the technical indicators are a bit mixed. The most concerning is the potential for a Bollinger Bands Squeeze and the decline in strength in the MACD up signal, which was weaker again on Monday.
However the first trading day of December has been positive almost 80% of the time over the last 25 years. December is normally a good month for stocks and while another big up month would be surprising, even a 4 or 5 percent gain for December would be excellent.
For Tuesday then, expect the day to end higher.
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