On Monday stocks staged a strong rally in the final hour of trading, rising from 3956 to 3990. Trading volume rose from Friday’s low volume as the index climbed. This is bullish and may signal investors are going to push stocks higher as long as CPI is not showing growing inflation. Momentum held a bullish bias all day on Monday. The S&P closed up 56 points to end the day at 3990.
The NASDAQ rose 139 points to end the day at 11,143.
With the inflation numbers due out Tuesday before markets open, let’s review the technical indicators at the close on Monday to see what to expect for Tue Dec 13 2022.
Stock Market Outlook Chart Comments At The Close on Mon Dec 12 2022
On Monday the S&P closed below the 200 day but at the 21 day which places it back above the 50 and 100 day moving averages. This is bullish. The closing candlestick is bullish and pointing to a second bounce attempt on Tuesday.
The Bollinger Bands have moved into a Bollinger Bands Squeeze to start the week off. While stocks could move in either direction out of the squeeze there are signs the squeeze may see stocks push higher.
A second up signal was generated on Wednesday Nov 30, with the 21 day moving above the 100 day. The 21 day is still climbing toward the 200 day. It could move above the 200 day this week. That will be a major up signal.
The 21 day, 50 day and 100 day moving averages are turning higher which is bullish. The 200 day is trending sideways which is neutral.
There are now 4 down signals in place since April 24 and two up signals.
The chart is 65% bearish for Tuesday.
Stock Market Outlook review of Mon Dec 12 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal Tuesday Dec 6 2022. On Monday the down signal lost some strength. The histogram is still negative.
- 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 and positive.
- 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 and bouncing off oversold readings.
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 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:
4150 is resistance
4120 is resistance
4100 is resistance
4090 is resistance
4070 is resistance
4050 is resistance
4030 is resistance
4025 is light support
4000 is light support
3975 is light support
3965 is light support
3950 is good support
3925 is light support
3900 is good support
3875 is light support
3850 is light support
3830 is light support
3810 is light support
3800 is good support
Stock Market Outlook for Tomorrow – Tue Dec 13 2022
For Tuesday the core CPI numbers due out at 8:30 will determine the market opening and may control the direction for the day depending on the number. If the number is lower than expectations the indexes will soar. It could easily reach 4075 or higher depending on the inflation number. If the number is worse than estimated, the index will open flat to lower and unless it is a “real shocker” number, the index will move lower but there will be some buying on any drop. With momentum in favor of the bulls, I would not expect a plunge except on an unexpected high inflation number.
The technical indicators after the close on Monday are showing more bullish biases. Even the down signal for MACD lost strength on Monday. All of these are good signs for the bulls.
Potential Economic and Political Market Moving Events
Tuesday and Wednesday have the most impact on market direction this week. Inflation numbers that are lower than the numbers below will see the index move higher.
Tuesday:
8:30 Consumer Price Index is estimated to be 0.3%
8:30 Core CPI is estimated to be 0.3%
8:30 CPI year-on-year is estimated to be lower at 7.3%
8:30 Core CPI year-on-year is estimated to be lower at 6.1%
8:30 CPI excluding shelter is estimated to be unchanged at 1.4%
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