On Friday May 31, the stock market outlook was for a down day on Friday and then an attempt to bounce. The bounce on Monday was in the morning and was given back so that by the close the index was lower than Friday’s close.
That has left the index very oversold still and at the point where normally a bounce would be expected.
Stock Market Outlook Chart Comments At The Close on Mon Jun 3 2019
On Monday the index closed just below the 200 day moving average for the second day. The 21 day moving average is further below the 50 day after continuing the sell signal from last week. The 50 day moving average is turning lower.
The candlestick at the close pointed to another bearish day for Tuesday. As well the Lower Bollinger Band is now below the 2800 valuation and well below the 200 day moving average which are bearish signals.
The Lower Bollinger Band is falling rapidly and the Upper Bollinger Band is also falling, both bearish signals.
Overall the chart remains quite bearish but it is also very oversold.
It would be rare for the index to just continue falling without retesting support at both the 200 day and the 2800 level.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and trying to rise.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday May 1. On Monday the down signal gained more strength which is pointing to more downside ahead. It is though very oversold and a bounce should be anticipated.
- 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 sideways and has reached oversold signals.
- 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 signal is pointing down for stocks but is into extreme oversold readings which normally result in a bounce.
- 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 only slightly and is very oversold.
- 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 and at oversold readings.
- 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:
2950 is resistance
2900 is resistance
2860 is light resistance
2830 is light resistance
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
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.
Stock Market Outlook for Tomorrow – Tue Jun 4 2019
As investors continue to worry more and more about the state of global economies and “what ifs” when it comes to trade between nations, the indexes are staying under selling pressure. But that selling pressure is also setting the indexes up to the point where a second bounce attempt should occur and it may happen as early as Tuesday.
A major catalyst will be needed to recover the markets, but a bounce is also good for quick trades, to close past trades and to setup for the next move lower. The S&P is reaching the point where either it will break down to 2700 or bounce first. I am expecting it to bounce first.