Stock Market Outlook for Tue May 28 2019 – Bounce Likely To Start But Still Lower

Friday saw stocks open higher on low volume ahead of the long Memorial Day Weekend.

Once the index was unable to hold 2840 it slipped early morning and by 11:15 AM the SPX was trading 20 points lower at 2820. That turned out to be the low of the day.

A rally over the early afternoon managed to push the index to 2832 but with low volume the index slid sideways for the remainder of the day and drifted down in the final half hour to close at 2826.

The best that could be said of Friday was that it did not break the lows of Thursday when investors kept testing the 2800 level.

Stock Market Outlook Chart Comments At The Close on Fri May 24 2019

On Friday the index closed up just a few points from Thursday’s close. This kept the index below the 50 day and just above the 100 day moving averages. The candlestick at the close pointed to another bearish day with the potential for a bounce to start Tuesday.

The Lower Bollinger Band fell below the 2800 level on Friday which is bearish.

The 21 day moving average has fallen almost to the 50 day. A drop below the 50 day would be another bearish signal to the downside should it occur.

For Friday the chart is pointing to a potential bounce to start Tuesday and then some weakness. Overall the SPX chart is bearish.

Stock Market Outlook review of May 24 2019

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 Friday the down signal was weaker but still showing some strength with a reading of minus 6.52.

• 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 below 50 which often sees a bounce attempt but nothing that lasts.

• 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 signal is pointing down for stocks.

• 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 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 sideways.

• 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 resistance

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 28 2019 

Once again we are looking at the potential for a slightly higher open on Tuesday but then the technical indicators are pointing to weakness after the open.

While there is a good chance historically for the indexes to close positive on Tuesday, overall the indicators are still pointing to more weakness for Tuesday and a bias to the downside.

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