Monday saw a second strong day for the S&P as it rose 84 points for a gain of 1.8% to close at 4515. The NASDAQ rose 469 points for an impressive 3.4% rise marking a second big up day for the index.
The two-day rally has sliced through the correction losses in just a matter of two trading days. The SPX rose from being down 9.2% last Thursday to just 5.2% on Monday. The NASDAQ rose from being down 14.6% last Thursday to just 8.9% on Monday.
Let’s review the technical indicators from Monday to see if they can advise if the correction is over.
Stock Market Outlook Chart Comments At The Close on Mon Jan 31 2022
The closing candlestick on Monday is bullish and closed above the 200 day and stay all day inside the Lower Bollinger Band for a third straight trading day. Both are bullish signals. The closing candlestick on Monday also is signaling we will see some selling on Tuesday which could be stronger than expected although with many investors now trying to get into stocks for fear of missing the rally, it’s hard to say just how deep dips may be. They could be shallower than expected.
The Upper Bollinger Band is turning lower which is bearish. The Lower Bollinger Band is moving sideways which is bullish.
The 21 day moving average is still below the 50 day moving average continuing the down signal.
The 100 day is falling which is bearish. The 200 day moving average is is turning sideways which is neutral.
The chart is still quite bearish. The strength for the bulls lies in the candlesticks and the 200 day moving average which has held the correction from falling deeper.
Stock Market Outlook review of Mon Jan 31 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and is negative. It is signaling the potential for a further rise on Tuesday.
- 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 Jan 6. On Monday the down signal was cut almost in half as it continues to weaken. This is a good sign for the bulls.
- 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 positive but unchanged from Friday.
- 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 stronger up signal.
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 sharply and could reach overbought readings as early as Tuesday.
- 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 rising which indicates there could be some further strong price action on Tuesday.
- 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:
4800 is resistance
4725 is resistance
4700 is resistance
4670 is resistance
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
4490 is light support
4475 is light support
4450 is support
4400 is good support and the 200 day moving average
4370 is light support
4350 is light support
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
Stock Market Outlook for Tomorrow – Tue Feb 1 2022
While Friday’s bounce was overdue, Monday’s bounce was strong on rising volume, a good sign for the bulls. The technical indicators along with the S&P chart are still signaling caution but they are more bullish than on Friday’s close.
After two strong rally days, dips and some selling has to be expected. With many investors having fled the market, many will still not have bought back in as the rally has been sharp and swift in just two days. That may mean dips on Tuesday will find ready buyers who missed the first two days and now want in. This may keep dips shallower than expected.
Whatever happens on Tuesday however, the outlook is still higher for the S&P. Another positive close is expected. At present the main concern for this week aside from Friday’s unemployment numbers for January is an invasion of Ukraine. A military move of that size would drop the market perhaps as much as 10% in short order depending on the circumstances. At present though, an invasion is not expected and the bulls are back in charge.
Stock Market Outlook Archives
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Stock Market Outlook for Thu May 2 2024 – Potential Bounce But Lower
Morning Investing Strategy Notes for Wed May 1 2024
Stock Market Outlook for Wed May 1 2024 – Bounce But Lower – Fed Interest Rate Decision
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Stock Market Outlook for Tue Apr 30 2024 – Dips Likely – Flat To Higher Close
Morning Investing Strategy Notes for Mon Apr 29 2024
Stock Market Outlook for Mon Apr 29 2024 – Some Weakness But Higher
Morning Investing Strategy Notes for Fri Apr 26 2024
Stock Market Outlook for Fri Apr 26 2024 – Higher and Positive Close
Morning Investing Strategy Notes for Thu Apr 25 2024
Stock Market Outlook for Thu Apr 25 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 24 2024
Stock Market Outlook for Wed Apr 24 2024 – Some Weakness But Higher Close
