Monday’s SPX was dominated by a large plunge in the final 45 minutes of the day which saw the index close below the 4500 valuation. The loss was small at down 16 points but from the high of the afternoon the loss was 38 points. The index closed at 4483.
For the start of the second week of February, the NASDAQ also ended the day down 82 points at 14015.
Let’s review the technical indicators from Monday to see what investors should expect for Tuesday.
Stock Market Outlook Chart Comments At The Close on Mon Feb 7 2022
The closing candlestick on Monday is bearish for Tuesday. The candlestick closed below the 50, 21 and 100 day moving averages. Intraday it touched the 21 day but again fell back.
The 21 day moving average is continuing to fall.
The Upper Bollinger Band is still falling which is quite bearish and suggests more selling is coming.
The Lower Bollinger Band is now trending sideways which is bearish at present but if the Upper Bollinger Band turns up, this sideways action will be bullish.
The 50 and 100 day moving averages are falling which is bearish. The 200 day moving average is sideways which is neutral.
The chart is bearish for Tuesday.
Stock Market Outlook review of Mon Feb 7 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a confirmed up signal on Friday Feb 4. There was some strength to the up signal on Monday but the MACD histogram (candlesticks above the MACD line) are showing very little positive 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 positive and falling for a second day.
- 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.
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.
- 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 unchanged for 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 resistance
4600 is resistance
4550 is light support
4525 is light support
4500 is good support
4490 is light support
4475 is light support
4450 is medium 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 8 2022
The technical indicators show limited strength for the bulls. While losses were small on Monday, Tuesday looks set to add to those losses.
A drop down to 4450 would not be unexpected on Tuesday. The close looks to be negative for Tuesday but may not be as deep as 4450.
If markets rally at the open I will be watching to buy SPY put options.
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