The technical indicators pointed to the index as probably bouncing on Monday morning but then moving lower into the close and ending up below 3000. Instead the morning saw an early dip to 3005 which immediately brought in buyers. Buyers then pushed the index all the way to 3053 by the close. In general there are some technical changes to report on but so far, the rally looks more like a bounce with the index still stuck in a trading range.
Stock Market Outlook Chart Comments At The Close on Mon Jun 29 2020
The index closed below the 21 day moving average for the fourth straight day but was above the 200 day moving average. The bounce on Monday left behind a bullish candlestick for Tuesday.
The index is still in a Bollinger Bands Squeeze with the Lower Bollinger Band almost reached Monday morning by the index dipping down to 3005.
However on Monday we also got a 6th up signal with the 100 day and 50 day both just above the 200 day.
This returns the index back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market. You can see however the the chart, while somewhat bullish, is also bearish as the index has been unable to recover back to above 3200. Since June 11, the S&P has been moving more sideways than higher or lower. On June 12 for example, the SPX ended at 3041 and today the index ended the day at 3053.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday June 12. The down signal was strong again on Monday. It has not wavered at all since June 12.
- 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 negative.
- 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 down signal in place.
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 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:
3200 is resistance
3150 is resistance
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%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Tue Jun 30 2020
Monday’s rally helped turn many of the indicators from “falling” to “rising”, but in general they are moving more sideways than actually rising or falling. This is confirmation of the pattern that we have seen develop since June 11. The index is staying above 3000, but just barely. Dips are continually being bought into as many investors missed the rally back from the March lows and are “making up for it” now.
The technical indicators are pointing more sideways than up or down which means on Tuesday we should see an attempt to try to push higher, but again dips are likely.
News that Wells Fargo will cut its dividend may weigh on the market. At the same time the other big banks all indicate they will be maintaining their dividends. That could counter the Wells Fargo announcement.
There is also news that Democrat candidate, Biden will end President Trump’s tax cuts if elected and that too may weigh on investors. There was also further comments by Fed Chair Powell that the recovery path is “extraordinarily uncertain” due to COVID19.
On the plus side while COVID19 confirmed cases have jumped, deaths have fallen dramatically. There is also the never-ending tidal wave of money from the Fed on a scale never seen before. Overall the outlook remains range bound but a major drop still shows no signals of being on the summer horizon, as June ends and investors enter July.
For Tuesday, ahead of the long weekend, look for more sideways action with a bias to the upside as investors will try to push to at least 3075 on Tuesday.