Monday was a wild day for the indexes. The Dow hit a record intraday before closing below that new record high. The S&P at one point was surging higher on optimism that the massive Covid-19 relief bill would push the economy further into recovery. But the NASDAQ just couldn’t hang on as more investors continued the carnage which spread wider on Monday afternoon. By the close the index was down 10% from its high which many analysts believe marks a correction for the index. With vaccination rates rising dramatically and more states moving away from restrictions, investors fled the NASDAQ tech stocks to take up positions in financial stocks and especially leisure stocks like Mariott Stock (MAR), Wyndham Worldwide Stock (WYN), Royal Caribbean Cruises Stock (RCL), Carnival Corp Stock (CCL), American Airlines Stock (AAL), Delta Air Lines Stock (DAL) and more. Despite next quarterly numbers continuing to look glum for these companies, investors believe the worst is far behind for leisure stocks. Despite this the S&P closed down 20 points to 3821 but still above 3800. The NASDAQ closed down 310 points to 12,609 while the Dow rose 306 points to 31,802.
Stock Market Outlook Chart Comments At The Close on Mon Mar 8 2021
The Bollinger Bands Squeeze has continued to widen on Monday as you can see in the chart below. This is bullish for the index. The closing candlestick on Monday was bearish for Tuesday but closed at the 50 day which often precedes a bounce attempt.
Both the 50 and 21 day moving averages are starting to turn lower.
The 100 and 200 day moving averages are all climbing higher.
While the chart does show the SPX is facing some trouble, the index still has not broken below the lows of Jan 29 and Feb 1. In other words, so far this is a normal correction in an ongoing bull market. Don’t be surprised if Tuesday opens, the market falls and then tries again to recover.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged from Friday’s close and still 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 Mon Feb 23 2021. On Monday the down signal weakened for a second straight day despite the selling. Often this signals a bottom or slowing in the selling is near.
- 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 falling for the first time in three days.
- 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 changed to an up signal for Tuesday.
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 turned lower but not significantly so. Often we will see a rise tomorrow based on the signal at today’s close.
- 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 back at levels where we would expect selling to slow.
- 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:
4000 is resistance
3900 is resistance
3850 that was support is now light resistance.
3800 is support – held up today.
3750 is good support and has assisted in keeping the selling in check
3700 is light support
3680 is light support – The 100 day moving average is at this valuation.
3600 is strong support
3550 is support
3500 is strong support
3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.
Stock Market Outlook for Tomorrow – Tue Mar 9 2021
Monday may have appeared as a poor day for the index but the technical indicators are advising that the selling may be slowing. There are signals that the index intends to holding the 3800 level even if it is broken again on Tuesday intraday.
The outlook is for more selling but there remains a good chance for another bounce attempt and investors may try for a higher close. If that fails, then look for a close at or above the 3800 level.