Stock Market Outlook for Tue Jul 6 2021 – Overbought, Dips Likely But Bullish

Friday saw the S&P climb 32 points for another closing high of 4352.

Much of the action on Friday commenced following excellent jobs numbers from June’s unemployment report which confirmed the economy is continuing to recover from the covid-19 lockdown.

Here are the closing technical indicators at the end of trading on Friday ahead of the July 4th long weekend.

Stock Market Outlook Chart Comments At The Close on Fri July 2 2021

The S&P closed above the Upper Bollinger Band which is often followed by a day of dips. The Lower Bollinger Band is continuing to decline which is bullish.

The closing candlestick on Friday is bullish for Tuesday but it also signals overbought so dips should be expected to start the shortened week.

The 21, 50, 100 and 200 day moving averages are climbing which are bullish signals. At the close on Friday there were no bearish signals in the chart.

Stock Market Outlook review of Fri Jul 2 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and positive and back at levels seen in mid April. Normally we should expect some weakness soon.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Friday June 25. That up signal was stronger again on Friday.

• 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 signaling overbought.

• 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 an up signal in place for Tuesday and is signaling extremely 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 into overbought readings.

• 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:

4350 is resistance

4300 is resistance

4290 is resistance

4270 is light support

4250 is light support

4225 is light support

4200 is light support

4175 is light support

4150 is light support

4100 is good support

4070 is light support

4050 is light support

4000 is good support

3900 is support

3850 is support

3800 is support

3750 is good support

3700 is light support

3680 is light support

3600 is strong support

 Stock Market Outlook for Tomorrow – Tue Jul 6 2021 

The technical indicators are all bullish and most are signaling overbought. Almost always that means we should expect some weakness on Tuesday when the index opens but despite the overbought condition, the market is bullish.

That means there is a good chance for another higher close although following last week’s gain of 72 points, a down day would not be out of the question for Tuesday.

No matter what happens on Tuesday the index is poised for further gains this week. The only catalyst that could alert that outlook is something to surprise investors in the Fed’s notes that are released on Wednesday afternoon. I find that unlikely and am positioned for further gains this week.

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