Monday saw the largest downturn since Oct 2. The index fell to the 21 day moving average intraday and closed just above it at 3114. The chance this is a one day dip is slim. Let’s take a look at Monday’s technical indicators to see what they can tell us about Tuesday.
Black Friday Special Ends Tuesday Dec 3 at Midnight EST
A reminder that the Black Friday special ends on Tuesday Dec 3 at Midnight. As the sale was extended an extra day there will be no extensions after Tuesday. There will be a small price increase after the Black Friday sale ends. Here are all the details.
Stock Market Outlook Chart Comments At The Close on Mon Dec 2 2019
The SPX chart is still bullish, but the drop down to the 21 day moving average on Monday is normally a cautionary signal.
The closing candlestick is bearish for the second straight day.
All the remaining signals are still bullish.
Light support has moved higher as of Friday’s close. It now sits at 3075.
All the major moving averages are still climbing including the 50 and 21 day moving averages. The 21 day moving average is still rising above the 3075 level which is bullish. The 50 day is above the 3030 level which is also bullish.
The Lower Bollinger Band has moved above the 50 day moving average which is bullish and is following the Upper Bollinger Band higher.
The 100 and 200 day moving averages are still rising.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and moving negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Tuesday Nov 26 2019. On Monday Dec 2 we received an unconfirmed down signal.
- 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 falling rapidly.
- 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 is overbought and has a down signal in place for Tuesday.
- 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. If it falls much further it will reach oversold 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 falling indicating lower prices may lie ahead.
- 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:
3150 is resistance
3075 is light support
3030 is light support
3000 is support
2960 is light support
2950 was light support
2900 is light support
2860 is light support
2840 is support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
Stock Market Outlook for Tomorrow – Tue Dec 3 2019
The technical indicators are all turning lower and another down signal was generated on Monday at the close from MACD. It is unconfirmed at present.
The drop on Monday was on good volume and was strong enough that we should expect a bounce back followed by more selling.
I am expecting a bounce in the morning, perhaps as early as the open, but then more selling. A break of 3110 is likely and a move down to 3100 a strong possibility.
The market will be looking for buyers on Tuesday and possibly Wednesday. Remember historically the first two weeks of December tend to be choppy whereas the second half of the month sees better gains.
All the weakness will change if a trade deal of any kind is reached with China.