On Friday investors were preparing for the long weekend but volume was actually not too bad and the S&P ended the day with a slight gain of 6.94 points to close at 2955. Here’s a look at Friday’s closing technical indicators and what they are forecasting for Tuesday when markets resume trading.
Stock Market Outlook Chart Comments At The Close on Fri May 22 2020
The SPX chart continues to be bearish with 6 sell signals in the chart and a Bollinger Bands Squeeze that is still underway. While signals still point more to the upside than downside, coming out of the Bollinger Bands Squeeze, there are still not clear signals to “guarantee” a move higher out of the squeeze. We should see something develop early this week which will give us a better picture of what to expect.
There are some bullish signs however such as an up signal on May 1 when the 21 day moved above the 50 day moving average. As well the 21 day is now at the 100 day and looks set to move above it next week. That will be another up signal. Also in the chart the 50 day if starting to turn back up, another good sign for the bulls.
Another bullish signal is the index closed again on Friday just above the 200 day moving average. This is the third straight day above the 200 day and the fourth close above the 200 day in 5 trading days.
Meanwhile the Upper and Lower Bollinger Bands are still climbing which is indicating that the index will move higher this week.
Bearish signals are still strong including the 200 day still leading the market and the very tight trading range over the past week.
The candlestick on Friday was bullish for Tuesday..
Stock Market Outlook review of Fri May 22 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling but 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 slightly stronger on 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 but 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 a weak up signal in place 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 is rising slightly.
- 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 rising slightly.
- 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 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 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 26 2020
For Tuesday, the technical indicators have a couple of signals that have lost strength, such as Momentum and the Ultimate Oscillator but the losses are minor. Meanwhile other indicators are still pointing higher and although the signals are not climbing rapidly, they are still pointing higher.
Tuesday still has enough strength in the index chart and in the technical indicators to point to a higher close. The futures on Monday evening are also pointing higher on the back of further good news on vaccine development and trials. However we need to keep an eye on China and its relation with the US which remains strained and over the weekend, had more pressure brought to bear. For now the index looks positioned to challenge 3000 but we could see a lot of selling at 3000 and as the Dow approaches 25000. A large percentage of investors believe the rally has been a large bear trap and are expecting the index to fall again. This was discussed this weekend in the article on Safeguarding Capital from Market Plunges. Many of those investors believe it will be a trade – COVID 19 “fight” with China that will send stocks lower as they did in the fall of 2018, so that needs to be watched.
For now, the S&P is positions to end Tuesday, higher. It probably won’t reach 3000 on Tuesday but it should close at least around 2975 to 2985. That should set the S&P up for a push to 3000 on Wednesday or Thursday.
Memorial Day Weekend Special on Memberships
For Memorial Day Weekend there was a discount special on 18 month memberships. There are 17 remaining memberships available. This evening members have asked me to leave the special open until the 17 memberships are sold out as a number of investors want to try to grab a few of the remaining ones on Tuesday morning. I will leave open the remaining memberships. After they are sold out, prices will be changing for membership.
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