Mon Jan 11 2021 saw weakness move into the indexes with the S&P giving back 25 points from last week’s rally.
By the close the index was at 3799.61 as it continued to hold the 3800 valuation.
Let’s review the closing technical signals from Monday to see what Tuesday might bring.
Stock Market Outlook Chart Comments At The Close on Mon Jan 11 2021
On Monday the index closed below the Upper Bollinger Band and left behind a bearish candlestick for the second straight trading day.
The Bollinger Bands Squeeze isended as you can see in the chart below, with both upper and lower bands separating. The Lower Bollinger Band has fallen back to the 50 day moving average ending the current Bollinger Bands Squeeze.
The major moving averages are still rising and the up signal from Oct 21 is still in play.
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 an up signal on Dec 7. On Monday the up signal was stronger.
- 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 an up signal in place and in once again 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.
- 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 trending higher which indicates there will be further changes in prices on 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:
3800 is resistance
3750 is resistance
3700 is light support
3600 is strong support
3550 is support
3500 is strong support
3450 is support
3400 is support
3375 is support
3300 is strong support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is strong support
Stock Market Outlook for Tomorrow – Tue Jan 12 2021
For Tuesday we should see some further action around the 3800 level as investors continue to take profits. Dips however remain trading opportunities as the outlook is unchanged at bullish.
The technical indicators are a bit more mixed but they are still overwhelmingly bullish.
On Tuesday then, the index will move back below 3800 a number of times, but by the close it will be above 3800.