Friday was another strong day for stocks. The S&P had its best day since Fri Jan 4. It closed at 2670 after recovering better than half of what was lost in the correction. Let’s look at the closing numbers for Fri Jan 18 to see a forecast for what to expect for Tuesday.
Stock Market Outlook Chart Comments At The Close on Fri Jan 18 2019
The S&P chart is still bearish with 6 sell signals. Meanwhile the 21, 50 and 100 day moving averages are turning back up which could be an early signal for the bulls. The Upper Bollinger Band is turning back up and is above the 100 day moving average for another bullish signal. The index on Friday reached the 100 day moving average and the Upper Bollinger Band, before closing back below them. These are further bullish signals.
The closing candlestick on Friday was bullish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Jan 4 2019. That up signal strong on Friday.
- 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 falling and overbought.
- 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 in place for Tuesday and is 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 rising and is overbought.
- 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 Resistance Levels To Be Aware Of:
2900 was support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong resistance
2795 is light resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is resistance
2675 is light resistance
2650 is support
2620 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Tue Jan 22 2019
For Tuesday, the technical indicators are almost all signaling the SPX is overbought. We should see some weakness on Tuesday and a few deeper dips. However until the underlying trend actually signals a change, all the dips this week, are trade opportunities.
Tuesday should see stocks dip, rally back, dip again and close slightly lower. However the trend is up even if Tuesday ends lower.
At present all the dips and any weakness is being seen as opportunities to place trades, by most investors. This tells us that the rally has more upside ahead even if the fourth week of January starts off with weakness and some selling.
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