Monday saw stocks rebound on the back of hope for another coronavirus relief package, plus news of phase 3 trial for Covid-19 vaccine from Moderna. Add in all the other companies that made announcements on Covid-19 vaccines and investors were buoyed enough to buy back the last two days of selling. The indexes closed higher.
Stock Market Outlook Chart Comments At The Close on Mon Jul 27 2020
The index closed above the 21 day moving average again on Monday and above 3200 leaving behind a bullish candlestick for Tuesday.
As well you can see in the chart that the Upper Bollinger Band has turned sideways and is no longer climbing. Meanwhile the Lower Bollinger Band is rising again. If we get a couple more down days we could see another Bollinger Bands Squeeze form up.
There are now 6 up signals and no down signals in the chart.
The 21 and 50 day moving averages are climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day but you can clearly see the Lower Bollinger Band is moving back toward the 100 day.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market.
Stock Market Outlook review of Mon Jul 27 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising on Monday.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday July 8. That up signal was gone on Monday. A neutral signal ended the day 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.
- 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 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.
- 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 indicating no large change in prices is expected.
- 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:
3275 is resistance
3200 is still resistance
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2500 was good support and marked a correction of 26.3%
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a 41% correction from the all-time high. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Tue Jul 28 2020
For Tue Jul 28 2020, the index technical indicators gained some strength following Monday’s rally. However MACD and the Slow Stochastic are still pointing lower. In particular MACD is reading 0.03 or basically neutral for Tuesday.
Other indicators that were falling yesterday are rising as of the close on Monday.
Normally the day after a bounce such as seen on Monday, is followed by some weakness in the morning. However with the relief package and more positive news on a vaccine the chance of a large drop is gone. That means any weakness resulting in a dip on Tuesday will be another opportunity to setup trades, as the day will end higher, in what will be a choppy session.
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