Monday’s rally started off with a dip by 10:30 below 3200 which immediately found buyers. From there the index climbed until the final hour of trading. The final hour saw the index shoot higher on high volume, reaching a new recovery high of 3232. The NASDAQ closed at another new all-time high of 9924. The day saw high volume and a much stronger close than I had expected. Let’s review Monday’s market to see what Tuesday brings.
Stock Market Outlook Chart Comments At The Close on Mon Jun 8 2020
The S&P closed above the Upper Bollinger Band on Monday for a second straight day, a bullish signal and a signal of being overbought.
The closing candlestick on Monday was once more bullish but it also is signaling a possible sideways or lower day on Tuesday or Wednesday, at least at the start of the day.
The S&P has been above the 200 day moving average since May 18, also bullish.
With 3 major up signals in the chart (see below) the 21, 50 and 100 day moving averages are all climbing higher. The 100 day moving average is ready to move above the 200 day which will be another up signal.
The Lower Bollinger Band is continuing to dip lower and the 50 day moving average is well above the Lower Bollinger Band, another bullish signal. The Upper Bollinger Band is continuing to rise along with the index which is also a bullish signal.
The SPX chart is bullish.
Stock Market Outlook review of Mon Jun 8 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Tuesday May 19. The up signal was stronger again 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: Despite the rally, the Ultimate Oscillator once again rose only slightly by the close on Monday which is normally a signal that the advance will slow for a day or two.
- 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 to neutral signal for Tuesday despite two days of rallying. It is also showing the index is 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 extremely overbought.
- 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 has turned sideways which indicates we should not expect prices to change much over the next couple of days.
- 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
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 9 2020
For Tuesday the signals are all positive except for the Slow Stochastic which has a weak down to neutral signal for Tuesday, showing. Aside from that indicator, the others are all pointing to the market as moving higher again on Tuesday.
The index is also very overbought which normally means dips are likely. On Monday we saw a dip in the first hour that broke below 3200. The chance of seeing that type of dip on Tuesday is pretty well none. Any dip on Tuesday will stop around 3215 or at most 3210.
Monday was stronger than I had expected. Tuesday should see further dips but again the close will be higher as the index may challenge the 3245 to 3250 valuation on Tuesday. For Tuesday then, I am expecting another choppy day of trading with dips likely, especially in the morning, but a higher close.
Stock Market Outlook Archives
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