The drop on Monday morning broke the SPX down to the 100 day moving average on good volume. Obviously a lot of investors were bailing on stocks. The heatmap was dominantly red with only a few health care and utility stocks still green as the rest of the market plunged. These types of plunges though, shake out concerned investors and that’s what happened on Monday morning. From the plunge buyers finally returned and snatched up stocks, pushing them higher. By the end of the day the NASDAQ which fell below its 200 day moving average in the morning drop, closed positive by a handful of points. The S&P was down just a few points. It was an impressive recovery and has set the indexes up for further advances, especially with many investors shaken out and worried about returning to stocks they had just sold out of.
Here are the closing technical indicators from Monday which advise Tuesday will be higher.
Stock Market Outlook Chart Comments At The Close on Mon Jan 10 2022
The most important signal on Monday from the SPX was the closing candlestick which showed a huge bounce off the 100 day moving average. This left behind a bullish candlestick for Tuesday.
The Upper Bollinger Band is turned sideways by the close, a bullish signal. The Lower Bollinger Band looks ready to fall back below the 100 day moving average, which is also bullish.
Meanwhile the 21 day moving average is still turning lower which is bearish but the 50 day, which is where today’s rally ended, is starting to turn back up. This is bullish.
The 100 and 200 day moving averages are still climbing which is bullish.
For Tuesday the signals are strongly bullish..
Stock Market Outlook review of Mon Jan 10 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is still falling sharply and is negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an down signal on Thursday Jan 6. On Monday the down signal was still stronger but expect to see that change shortly.
- 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.
- 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.
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 and into oversold readings. A bounce is the probable outcome.
- 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:
4800 is resistance
4725 is resistance
4700 is support
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Tue Jan 11 2022
In the support and resistance levels section you can see that 4600 is listed as good support. Today the index fell below it, reaching 4582 and then bouncing. This is a typical reaction to an oversold market and in most instances the bounce will last longer than a single day.
The technical indicators are supportive of a further higher day on Tuesday. A close above the 21 day moving average which be excellent for Tuesday. Don’t be surprised if there are some dips and some could be deeper than expected but the end result will be higher for the SPX by the close on Tuesday. That means dips are once again, opportunities to setup trades.
Stock Market Outlook Archives
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Morning Investing Strategy Notes for Wed Apr 17 2024
Stock Market Outlook for Wed Apr 17 2024 – Another Bounce Attempt
Morning Investing Strategy Notes for Tue Apr 16 2024
Stock Market Outlook for Tue Apr 16 2024 – Deeply Oversold
Morning Investing Strategy Notes for Mon Apr 15 2024
Stock Market Outlook for Mon Apr 15 2024 – Expect A Bounce
Morning Investing Strategy Notes for Fri Apr 12 2024
Stock Market Outlook for Fri Apr 12 2024 – All About Bank Earnings
Morning Investing Strategy Notes for Thu Apr 11 2024
Stock Market Outlook for Thu Apr 11 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 10 2024
Stock Market Outlook for Wed Apr 10 2024 – All About The CPI Numbers
Morning Investing Strategy Notes for Tue Apr 9 2024
Stock Market Outlook for Tue Apr 9 2024 – Morning Weakness Possible But Higher Close
