Stock Market Outlook for Tue Jan 26 2021 – Mixed With A Down Bias

Monday saw the S&P fall to the 3800 level in a dramatic drop of 1.4% intraday before regaining composure. A variety of reasons were bantered about for the sudden drop late morning but overall the drop to 3800 was not expected and may have set the index up for another day of weakness on Tuesday. The S&P ended the day up 13 points to 3855 as investors continue to try to hold 3850.

Stock Market Outlook Chart Comments At The Close on Mon Jan 25 2021 

On Monday the index closed below the Upper Bollinger Band once again. The deep dip in the index intraday left behind a bearish candlestick that touched the 3800 level, plunging quickly below 3850 in a matter of minutes.

The Bollinger Bands are back in bullish mode with the Upper Bollinger Band climbing but the Lower Bollinger Band is starting to turn back up due to the past two days of weak price action on the S&P.

The major moving averages are still rising and the up signal from Oct 21 is still in play (no longer shown in the chart). The chart is still bullish with only the closing candlestick being bearish.

Stock Market Outlook review of Mon Jan 25 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling slightly 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 Jan 20. The up signal was still active on Monday.

• 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 and heading into overbought signals shortly.

• 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 weak up signal in place 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 pushing toward overbought signals.

• 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:

3850 is resistance

3800 is support

3750 is support

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 26 2021 

For Tuesday, the outlook is weaker for the index. Dips will occur again on Tuesday although there are no indications they will take the index back to 3800 today.

The technical indicators are mixed but the bias remains bullish among the indicators.

Overall we will see another day of volatility, with dips common and this time we could see a lower close on the day as the bias for Tuesday is more down than up.

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