Investors went back into stocks on Monday following a weekend that saw more cases of the coronavirus but the majority within China. Investors seemed to decide that Friday’s drop afforded some “bargains”. All 3 indexes rose on Monday with the NASDAQ up the most at 1.34%. The Dow Index roared ahead at the open but spent much of the day watching the morning high be eroded. The close saw the Dow index up half a percent for a gain of 143.78 points. Overall though the Dow index is down just 3.3% from its all-time high of 29,373.
Stock Market Outlook Chart Comments At The Close on Mon Feb 3 2020
The SPX chart stayed bearish on Monday.
Technically, what we saw on Monday was a bounce off the 50 day moving average. On Friday the index reached the 50 day moving average. Normally there will be a bounce off the major moving averages, therefore a bounce on Monday was expected and did occur. However the closing candlestick at the close has a long head which usually is a warning that the bounce cannot be trusted.
The Bollinger Bands are still working their way into a potential Bollinger Bands Squeeze. The 21, 50 and 100 day moving averages are now starting to turn lower. Only the 200 day is still climbing.
There are four support levels in place. These are light support at 3200 which may get tested as early as Tuesday, 3100 which is a full 100 points lower, 3075 which is light support and 3000 which is major support.
For Tuesday the chart remains bearish. The index still looks like it plans to fall below the 50 day to challenge support at 3200 and then move lower to probably the 100 day moving average.
Stock Market Outlook review of Mon Feb 3 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative, oversold but rose slightly on Monday.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Jan 24. At the close on Monday the sell signal was very strong. The MACD histogram shows the market as oversold.
- 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 rising.
- 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 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 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 sideways and still oversold. This indicates no change in prices are expected.
- 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:
3325 is resistance
3200 is light support
3100 is light support
3075 is light support
3030 is very light support
3000 is good support and if the S&P fell this low it would mark a normal correction in a bull market
2960 is light support
2900 is light support
2860 is light support
2840 is good support
2800 is strong support
Stock Market Outlook for Tomorrow – Tue Feb 4 2020
For Tuesday the technical indicators are still bearish, although some have turned back higher. None though point to any rally as starting up. Instead there are signals that the index will move lower.
The market needs positive news on the coronavirus issue. Without it, every bounce will be suspect. Every bounce has a good chance of a drop back after the bounce is over.
Alphabet (GOOGL) earnings were not as good as expected and the stock sank after hours. Investors may use the move lower in Alphabet Stock (GOOGL) as an excuse to take more profits on Tuesday.
For now then, the market remains oversold with a high probability that the current bounce is only a bounce and another move lower is still highly probable.
Stock Market Outlook Archives
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
Morning Investing Strategy Notes for Tue Apr 30 2024
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
Morning Investing Strategy Notes for Tue Apr 23 2024
Stock Market Outlook for Tue Apr 23 2024 – Bounce But Lower