Monday saw stocks give back some of the recent gains as a disappointing 2019 outlook from Caterpillar combined with an earnings warning from NVIDIA to send stocks lower from the open. Indexes though, managed to close well off their lows.
Stock Market Outlook Chart Comments At The Close on Mon Jan 28 2019
The S&P chart is still bearish with 6 sell signals.
The first sell signal was Oct 17 and the second sell signal was Oct 26. Both of these are off the 3 month chart, but I left the info on the chart as a reminder.
What we are now seeing is both the 50 day and 100 day moving averages falling away from the 200 day. This is a bearish signal advising caution that we could see a further dip coming up. Meanwhile the 21 day moving average is rapidly rising which is a good sign for stocks.
The closing candlestick on Monday was bearish for Tuesday. Meanwhile the Upper Bollinger Band is falling back and the Lower Bollinger Band is moving higher. We might see a Bollinger Bands Squeeze later this week which could signal either a move higher, or, more likely, a move lower. We will know more as the days unfold this week.
Overall the S&P chart remains bearish.
Stock Market Outlook review of Mon Jan 28 2019
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 was a weaker today.
- 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 moving lower.
- 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 and is still 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 also 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 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
2625 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 29 2019
The SPX chart is becoming more bearish as the index has trouble climbing above 2650. If the index falls back to 2600 shortly, I will be buying more spy put options and preparing for a move back lower.
For Tuesday the technical indicators are turning bearish although most remain positive but are falling. Wednesday we get the Fed’s latest decision on interest rates so I am not expecting Tuesday to be higher. The day will end lower for the S&P and stocks in general.
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