It only took selling in Apple Stock to commence a further decline in the stock markets on Mon Nov 12 2018.
By the close, every reason imaginable was being quoted for the drop on Monday from a strong dollar to rising interest rates to worries about the potential for the bond market opening higher on Tuesday.
By the end of the day the markets closed off their worst lows but near them. The Dow was down 602 points for a loss of 2.32%. The S&P dropped 54 points for a loss of 1.97%. The NASDAQ fell 206 points to loss 2.78%.
Stock Market Outlook Chart Comments At The Close on Mon Nov 12 2018
The S&P index closed below the 200 day moving average. It left a bearish candlestick for Tuesday.
Note too that the Upper Bollinger Band which bounced off the 50 day moving average starting on Thursday last week is starting to turn down again which is bearish.
The 50 day moving average is still falling and should it cross over the 100 day, it will be another major sell signal.
All the other moving averages are falling except for the 21 day which is trying to turn back up. The SPX is struggling against 3 major sell signals. The chart is quite bearish.
Stock Market Outlook review of Mon Nov 12 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Mon Nov 5 2018. 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 not overbought.
- 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 down signal in place for Tuesday and is overbought.
- 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 rising.
- 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:
2900 was good support – this will be strong resistance
2860 was good support – this will be resistance
2830 was light support and will be light resistance
2795 is light resistance
2745 to 2750 are still light resistance
2725 is light support.
2700 is important support
2675 is light support
2650 is light support
2620 is light support
2600 is strong support and held the market up from the lowest pullback in the present correction
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Tue Nov 13 2018
The market on Monday managed to close just above the 2725 support level. During the worst of the selling the 2725 support level broke and the S&P pushed down to 2722, but buyers brought the S&P back to the 2725 level by the close. In the section above under the heading Support Resistance Levels To Be Aware Of, you can see that 2725 is support.
Today’s bounce back to 2725 could set the S&P up for a potential bounce attempt on Tuesday, but it will fail.
Even if the market opens lower on Tuesday, there is a chance for a potential bounce back which could reach as high as 2745 to 2750 although that is unlikely. The highest bounce would probably stall out at 2740 on Tuesday. The market will move lower on Tuesday and could fall to 2700 by the close. 2700 is important for the rally at present. Any break below 2700 should see a bounce, but then the market could move down to 2695 sometime during the day. I am expecting a negative close on Tuesday and a very choppy day of swings.
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