Monday July 30 saw the sell-off in tech stocks continue but it widened into more S&P stocks and the Dow 30 where 13 of the 30 companies were declining with VISA, American Express, Boeing, Microsoft and Caterpillar with the largest losses on the Dow, leading it lower.
The selling spread as well into the Russell 2000 which lost half a percent.
The VIX rose 9.4% to close at $14.26. Here’s is the stock market outlook for the final day of July.
Stock Market Outlook Chart Comments At The Close on Mon Jul 30 2018
The S&P ended the day on Monday still above 2800 but just barely. It broke through 2800 twice over the late lunch hour. An afternoon rally attempt couldn’t hold the 2810 level and the S&P fell back into the close managing to hold 2800 with a close at 2802.60.
The close left behind another bearish candlestick for Tuesday although a deep close near the low of the day often is followed by a morning bounce back.
All the major moving averages are still rising.
The Bollinger Bands are continuing to signal the index will move higher but there are some very early signs of a possible Bollinger Bands Squeeze starting to get setup.
The SPX chart is still bullish but a break of the 21 day moving average should it happen on Tuesday, would turn the chart short-term bearish.
Stock Market Outlook review of Mon Jul 30 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive but falling and almost ready to turn negative.
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 an up signal on July 9. The up signal is almost ready to turn into a sell signal if there is more selling on Tuesday.
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 still falling.
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 no longer overbought and has a strong down signal for Tuesday.
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 is often the first indicator to show an overbought or oversold signal. The RSI signal is falling quickly.
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. 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. The rate of change signal is positive and falling indicating lower prices are expected.
Support Levels To Be Aware Of:
2795 is light support
2745 to 2750 is light support
2725 is light support.
2700 is support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
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 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Tue Jul 31 2018
By the close on Mon Jul 30 2018 the technical indicators had shifted with a bias beginning to build to the downside. MACD is on the verge of a sell signal. The Slow Stochastic has a strong sell signal in place and momentum is less than a point from turning negative.
All the other indicators are falling quickly.
A sell signal from MACD is normally a strong indication that a trend change is coming so this indicator will be watched closely.
At the same time, this kind of action combined with a long bearish candlestick and the close right near the lows of the day on Monday, often sets the market up for a morning bounce.
For Tuesday then, we will probably see the market retest 2795 but there is a good chance for a bounce in the morning before selling returns.
Many tech stocks are getting cheaper. Facebook on Monday fell to $166.56 but then managed to close back above $170. Intel fell to $46.43 and could be working its way to $45 but it closed at $47.69 up 1 cent on the day. Meanwhile Advanced Micro Devices Stock (And) which is a Trade Ahead Of Earnings Strategy trade and continues to generate excellent profits for my portfolio, rose 2.53% on Monday despite the tech sell-off. These are signs of buyers lurking amid the tech sell-off.
Apple reports earnings on Tuesday after the close. Tuesday could see a bounce attempt ahead of Apple earnings. This first bounce might fail, but it will advise what we may see next. Good earnings from Apple after the close could setup a second bounce attempt on Wednesday.
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