Stock Market Outlook for Tue Feb 23 2021 – Unconfirmed Down But Bounce Ahead

Stock Market Outlook - Bounce

Monday saw stocks move lower with the S&P ending the day down 30 points to 3876. The NASDAQ though saw a decline of 341 points to close at 13,533 for a drop of 3.5%.

Stock Market Outlook Chart Comments At The Close on  Mon Feb 22 2021 

The S&P closed at the low of the day and at 21 day moving average breaking below 3900. The closing candlestick is bearish for Tuesday but is also typical of a bounce, especially with the close at the 21 day moving average.

The Upper Bollinger Band is continuing to rise. The Lower Bollinger Band is turning back up. For this week we need to watch to see if the Upper Bollinger Band turns lower and the Lower Bollinger Band moves back above the 50 day. Those would be sell signals.

The 21 day moving average is starting to dip. The 200, 100 and 50 day moving averages are still climbing. A break below the 21 day moving average should it occur on Tuesday will setup the index to fall to the 50 day which is 76 points lower at 3800.

Stock Market Outlook review of Mon Feb 22 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and has turned 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 Fri Feb 5 2021. On Monday we received an unconfirmed down signal. A lower close on Tuesday will see this down signal get confirmed.

  • 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 falling.

  • 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 down signal in place and is still 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 falling and at 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.

  • 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.

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 23 2021 

The big technical event on Monday at the close was the new down signal from the Moving Average Convergence / Divergence (MACD) technical tool. This is unconfirmed but the signal was strong by the close of the day.

At the same time there are some readings that the index is already reaching an oversold environment which normally results in a bounce. The index closed a the 21 day on Monday and the closing candlestick often signals a bounce before more selling.

On Tuesday then, watch for a potential bounce and then more selling taking the index probably to test the 3800 level this week.

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