Friday was another whipsaw day for the markets with all 3 major indexes falling and then rallying again. In the intraday chart below you can see the activity on Friday which is encouraging for the start of this week for the bulls. On Friday the index pushed higher early morning but then started a series of lower lows. Each sell-off was lower than the prior one which most analysts felt indicated a major break lower was coming. Indeed a close at 4610 would have been tough on the bulls to start off this week. However instead the final drop early afternoon found buyers again and buying became steady and by 3:00 PM relentless in many stocks that had been punished in the first half of the day. The close was slightly positive with a gain of 3.82 points but the importance was this was a retest of Monday’s plunge.
SPX Intraday Fri Jan 14 2022
Looking at the week in the daily chart below, you can see Monday’s drop down to the 4600 valuation touched the 100 day moving average resulting in the S&P bounce. Friday’s drop, while not as pronounced, took the index down to 4614 before it bounced. The chance the index breaks lower this upcoming week is limited unless there is a new catalyst, such as Russia invading the Ukraine or even more probable, an unknown event. The sell-off on Thursday which was caused by remarks on more interest rates in 2022 than the expected 3 or 4 quarter points mixed with inflation worries, setup Friday for selling. But there were signs on Friday that inflation may be peaking along with the number of omicron hospitalizations and that assisted the retest of the lows last Monday.
NASDAQ
The same picture can be seen in the NASDAQ where Monday’s low was retested and held the 200 day moving average. This also advises that the upcoming week will be better for NASDAQ stocks. I will be buying the TQQQ on Tuesday early morning, especially if the day starts with a dip in the first 5 or 10 minutes which is probable. Another scenario for Tuesday morning would be a jump at the open and then a large dip after 10:00 AM. If that happens I will be buying the TQQQ in a large dip. We have often see this in the past several weeks starting in mid-December with a reversal at 10:30 to 11:00. The NASDAQ closed up 87 points to 14,893 and should be above 15000 on Tuesday by the close.
Let’s review the technical signals from Friday’s close on the SPX to see what they are advising for the start of the week.
Stock Market Outlook Chart Comments At The Close on Fri Jan 14 2022
The closing candlestick on Friday is bullish for a bounce higher. They could be a dip early morning but a higher close is pointed to.
The Upper Bollinger Band is starting to rise which is a bullish signal. The Lower Bollinger Band is starting to fall again, also bullish.
The 21 day is falling which is bearish but the 50 day is steady and the 100 and 200 day are still rising which are all bullish.
The chart is more bullish than bearish for the start of the week’s trading.
Stock Market Outlook review of Fri Jan 14 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and is negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Thursday Jan 6. On Friday the down signal gained more 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 rising sharply.
- 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 rising off an oversold signal.
- 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:
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 18 2022
The technical indicators are mixed and definitely divided but momentum indicates a rise in strength which should carry through into Tuesday.
The biggest concern is MACD continuing to gain strength to the downside and another down signal from the Slow Stochastic which could mean by Wednesday or Thursday the markets could be facing more selling.
For now though the outlook is for a potential slip at the open or a dip mid-morning but then a move higher into the close. This should hold for both the SPX and NASDAQ on Tuesday. I will be buying SPY calls on any dip in any morning dip in the SPX and the TQQQ in any strong dips in the NASDAQ on Tuesday. I will be selling them intraday and not holding any into Wednesday. I would prefer to buy again on Wednesday if the signals after Tuesday’s close still point higher.
Stock Market Outlook Archives
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Stock Market Outlook for Wed Apr 24 2024 – Some Weakness But Higher Close
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Stock Market Outlook for Tue Apr 23 2024 – Bounce But Lower
Morning Investing Strategy Notes for Mon Apr 22 2024
Stock Market Outlook for Mon Apr 22 2024 – No Change – Deeply Oversold Bounce Possible
Morning Investing Strategy Notes for Fri Apr 19 2024
Stock Market Outlook for Fri Apr 19 2024 – Deeply Oversold – Bounce Likely – Higher Close
Morning Investing Strategy Notes for Thu Apr 18 2024
Stock Market Outlook for Thu Apr 18 2024 – Deeply Oversold – Bounce Attempt Expected
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