Stock Market Outlook for Tue Feb 16 2021 – Early Morning Dip Likely But Higher Close

Friday saw the S&P end the day up 18 points to close at a new all-time high and close high of 3934. The index is within 66 points of reaching 4000.

What was interesting on Friday though was the tight trading for the entire day except for the close. The one minute chart below from Friday, shows the index opened the day at 3911 and stayed within a range of 3913 and 3924 for most of the day. The final 30 minutes saw the index rally 10 points to close at the high of 3934. Volume rose in the final half hour which, ahead of a long weekend, is unusual. Normally as the day progresses ahead of a long weekend, volume drops off. We could see a lower open on Tuesday, or a jump and then a move lower near the open, but the rally in the final 10 minutes on high volume shows bullishness for the start of this shortened week. The index should challenge 4000 early in the week. Let’s review Friday’s technical closing signals to see what they tells us about the start of the third week of February.

Stock Market Outlook Chart Comments At The Close on Fri Feb 12 2021 

The S&P closed higher on Friday as it continues to pressure the Upper Bollinger Band. The closing candlestick is bullish for Tuesday.

The Upper Bollinger Band is continuing to rise while the Lower Bollinger Band is falling lower. Both of these trends are bullish for higher prices. If we see the Lower Bollinger Band begin to turn back up, that is a cautionary signal to watch for dips to appear. For now, the Lower Bollinger Band is falling away from the 50 day.

The 21 day moving average is rising and is now at 3850. The 200, 100 and 50 day moving averages are still climbing with the 100 day moving average now at the 3650 valuation and the important 200 day moving average at 3470. These are strong indicators the market will continue to push to new highs.

Stock Market Outlook – Review of Feb 12 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising strongly and is 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 Fri Feb 5 2021. On Friday the up signal continued to gain 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 and into slight overbought readings.

• 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 neutral signal to start the week and is signaling very 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 rising higher into stronger 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 rising.

• 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:

4000 is resistance

3900 is resistance

3850 is support. The 21 day moving average is presenting here.

3800 is support.

3750 is support

3700 is light support

3600 is strong support

3550 is support

3500 is strong support

3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.

 Stock Market Outlook for Tomorrow – Tue Feb 16 2021 

For Tuesday the S&P is opening at an all-time high. Volume was strong in the final half hour of trading. Normally we should expect either a drop at the open of trading on Monday, or a bounce attempt higher and then a dip back lower before advancing higher again. Either way the outlook is for a higher close again on Tuesday.

The technical indicators are supportive of the index pushing still higher on Monday. Only one indicator is neutral, the Slow Stochastic. All the remaining technical indicators are positive and rising.

With the second impeachment trial completed, investors will be anticipating the passage of a large stimulus bill of “some kind”. Whether it is almost $2 trillion or somewhat less will not matter to investors. It is the prospects for more stimulus that will push stocks still higher.

Dips on Tuesday are once again opportunities to setup trades. In upcoming days, any failure of a stimulus bill will pressure stocks lower.

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