Monday saw heavy selling again as investors worried further on retaliatory tariffs from China. Selling started at the outset and continued most of the day. The 2800 level was reached and tested several times but held up. The day ended with a weak rally to just above the 2810 level at 2811.87. The NASDAQ saw the biggest drop of the year ending the day at 7647.02. The Dow lost 617 points to close at 25,324.99.
Stock Market Outlook Chart Comments At The Close on Mon May 13 2019
The drop on Monday left the index at the 100 day moving average. This type of drop is almost always followed by a bounce and then a move to the 200 day.
The candlestick on Monday is bearish to Tuesday.
The Lower Bollinger Band is falling rapidly and is back below the 50 day moving average indicating more downside yet to come.
The chart is bearish but the 50, 100 and 200 day moving averages are still climbing.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and still falling. It is signaling oversold.
- 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 was stronger again and indicating oversold.
- 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 negative and falling.
- 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 neutral signal in place and oversold.
- 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 and indicating 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 also oversold.
- 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 light support
2860 is light support
2830 is light support
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 May 14 2019
The technical indicators are signaling a very oversold market.
The sell-off has reached the 2800 level and should see a bounce on Tuesday although probably not at the open. Instead I anticipate a higher open, then a dip and then a bounce.
Following the bounce, the S&P should retest 2800 again, either later on Tuesday or on Wednesday.
2800 is an important technical support level for the market and goes back to the fall of 2018.
For Tuesday then we have the potential for a decent bounce, but the selling is not yet over.
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