What Happened On Mon Jan 22 2018
I had expected some weakness on Monday but then, so did most analysts so there was no weakness. Instead investors were ready to buy despite the government shutdown. As word spread that a deal had been reached for a short-term reprieve of the shutdown stocks moved still higher. Into the close, stocks rallied sharply higher, closing at all new highs on all 3 indexes.
Closing Statistics for Mon Jan 22 2018
S&P 500 Index Close
The S&P index ended up 22.67 to 2832.97
Dow Jones Index Close
The Dow Jones ended up 142.88 to 26214.60
NASDAQ Index Close
The NASDAQ closed up 71.65 to 7408.03
Stock Market Outlook – Review of Mon Jan 22 2018
Chart Comments At The Close:
Monday saw the S&P move higher all day. By the close the S&P was at the Upper Bollinger Band for the 13th straight day. The index closed at the high of the day leaving behind a bullish candlestick for Tuesday.
Often this candlestick will see some weakness the following day but as every bit of weakness is finding buyers, it is doubtful much weakness will be seen.
All the major moving averages are still climbing.
Stock Market Outlook review of Mon Jan 22 2018
Stock Market Outlook: Technical Indicators:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and moving sideways.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on Jan 4. That buy signal gained more strength on Monday. It is now at the best readings in more than 3 years.
Ultimate Oscillator: 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. The Ultimate Oscillator signal is positive and moving sideways.
Slow Stochastic: 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. The Slow Stochastic is extremely overbought and has an up signal in place.
Relative Strength Index: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It often is the first indicator to show an overbought or oversold signal. The RSI signal is also extremely overbought and rising.
Rate of Change: 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. The rate of change signal is positive and rising continuing staying at its best readings since July 2016.
Support Levels To Be Aware Of:
2675 and 2620 are light support.
There is good support at the 2550 level.
The S&P has light support at 2480. It also has light support at 2450 and 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 as a drop to this level would be almost 15%.
Stock Market Outlook for Tomorrow – Tue Jan 23 2018
In an “normal” market we would see weakness in the morning on Tuesday following a strong day on Monday. That though is probably not going to be the case.
Signals are very strong particularly from MACD and the Rate Of Change. MACD has not seen signals this strong in over 3 years. The rate of change is the strongest it has been since July 2016. At some point we are going to see weakness but Tuesday doesn’t look like it will be that day. Netflix earnings were better than expected and that should help boost stocks on Tuesday as investors enthusiastically prepare for more earnings this week. The outlook remains overbought and higher.
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