Monday’s market tried to push higher but faced a lot of selling. With the index back above 2900, investors are taking profits on stocks. The day ended with a flat day for the S&P, a small gain on the NASDAQ and a loss of 109 points on the Dow Jones.
Stock Market Outlook Chart Comments At The Close on Mon May 11 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and a Bollinger Bands Squeeze that is still underway. There is one up signal from May 1 with the 21 day moving average back above the 50 day. As well, on Friday the index closed at the 200 day moving average. The NASDAQ has stayed above the 200 day moving average since April 22 and was at it’s highest level on Friday, since the collapse of markets in March.
The 200 day moving average is still leading the market, which is typical in a bear market. It is still followed closely by the 100 day. The 50 day is continuing to fall while the 21 day is moving higher and could cross the 100 day moving average this week, which would be a second up signal.
The closing candlestick on Monday was bearish for Tuesday.
The Bollinger Bands Squeeze is underway without any clear indication which way the market will move as it comes out of the squeeze. The Lower Bollinger Band is at the 50 day and the Upper Bollinger Band is at the 200 day, both of which are normally bullish in a rally. While the chart is still bearish there are growing signs that the lows of March may not be revisited unless a new catalyst to the downside should appear.
Stock Market Outlook review of Mon May 11 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling 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 Thursday March 26. The up signal was weaker 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: The Ultimate Oscillator signal is falling and positive.
- 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.
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 moving sideways.
- 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 indicating lower prices may be seen shortly.
- 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:
3000 is strong resistance
2950 is resistance
2900 is resistance
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 and most analysts believe this is the low point we will see.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts believe the index will fall this low before the bear market ends.
Stock Market Outlook for Tomorrow – Tue May 12 2020
China’s PPI fell 3.1%, adding to investor worries. As well, investors are also focused on concerns over the chance covid-19 cases will rise with the reopening of the economy.
There is still strength in the technical indicators but some have turned back to either pointing lower or sideways.
For Tuesday we will probably see some dips and a lower day of weakness. The close though could be reasonably flat from Monday’s close.
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