Monday’s outlook was for weakness but still holding a bias to the upside. That was definitely not the case.
Builder confidence falling to a four year low was all it took to get the selling started. From there investors started to throw in the towel on Apple, Facebook, Amazon, Adobe, Micron, Salesforce.com, Twilio, NVIDIA, Shopify, Alphabet, Netflix and more. The NASDAQ plunged 3% leading all the indexes with losses. The S&P lost 1.6% and the NASDAQ 1.5%.
Stock Market Outlook Chart Comments At The Close on Mon Nov 19 2018
The S&P index closed below the 200 day and 21 day moving averages on Monday. This left behind a bearish candlestick for Tuesday.
The 50 day moving average is still falling but has not yet crossed below the 100 day. The same with the Upper Bollinger Band which has fallen to the 50 day but not below it.
The SPX continues to struggle against 3 major sell signals and the break of the 2700 level on Monday and close below it are bearish..
The S&P chart is bearish.
Stock Market Outlook review of Mon Nov 19 2018
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 an up signal on Mon Nov 5 2018. The up signal was weaker on Monday but is still not a sell signal.
- 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 sideways rather than 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 down 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 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 indicating lower prices lie ahead.
- 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 light resistance
2725 is light resistance.
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 20 2018
All it took was one large down day to change the technical indicators from where they were starting to turn a bit bullish, back to being bearish.
Yet only the Slow Stochastic is downright bearish which tells us that even in the decline there are still buyers.
The Ultimate Oscillator is sideways not actually falling and MACD continues to cling to an up signal.
If the correction continues to follow a typical path, tomorrow should be lower again and then Wednesday could see the market try to hold above 2600.
Investors are continuing to grow more bearish daily, which could be the best chance the bulls have to try to put together some kind of year-end rally. The question is, how low will the indexes be if a year-end rally does start?
For Tuesday the S&P will close lower and should test the 2650 level which is light support.
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