Monday saw a similar pattern emerge. The morning opened lower, then rallied to the highs of the day. From there is SPX had trouble pushing beyond 2850.
Eventually the index sold back down and closed negative losing just over half a percent at 2840.
Stock Market Outlook Chart Comments At The Close on Mon May 20 2019
On Monday the index closed below the 50 day moving average and below the 21 day. The closing candlestick is bearish for Tuesday. Often though, this type of candlestick points to a potential bounce about to occur.
The lower Bollinger Bands is still falling as is the 21 day moving average. The Lower Bollinger Band is now down to the Lower Bollinger Band. The 21 day moving average could fall to the 50 day shortly unless we get some up days soon.
The 50 day is beginning to weaken but the 100 and 200 day moving averages are still climbing.
The chart is bearish for Tuesday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling.
- 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 weaker than Friday.
- 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.
- 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.
- 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.
- 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.
- 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 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 21 2019
The technical indicators remain mixed. Moving Average Convergence / Divergence continues to indicate there is more downside ahead. The Slow Stochastic has moved to a neutral outlook pointing to neither a higher or lower day ahead. The rate of change is indicating lower prices are ahead and the Relative Strength Index (RSI) is falling again as is the momentum indicator. Meanwhile the Ultimate Oscillator is following the Slow Stochastic with a neutral outlook.
So despite another day of selling, none of the indicators are pointing to a large drop ahead for stocks. Instead they are showing no change in the outlook for weakness for stocks but not breaking down.
Tuesday could see stocks again attempt o recover some of the losses from Monday. Most signals point lower for Tuesday so the outlook is weakness with a bias lower, but be prepared for the potential of a bounce back, even if only a small one on Tuesday.