The rally on Monday was not unexpected as the market was oversold. The close of the day saw the indexes at the highs of the day. Often this sets the markets up for an early morning dip. The S&P closed up 40 points to 2673 and held the 2650 level all day on Monday.
Stock Market Outlook Chart Comments At The Close on Mon Nov 26 2018
The S&P index closed below the 200 day and 21 day moving averages again on Monday but above the prior 3 days of trading.
It closed inside the Lower Bollinger Band which is also a bit bullish.
The Upper Bollinger Band is trying to climb which to some extent is also a bit of a bullish sign.
The candlestick from Monday is bullish although often the day can start with a dip due to the close at the day’s highs.
The 50 day moving average is still falling but has still not crossed below the 100 day.
The SPX continues to struggle against 3 major sell signals and the break of the 2700 level on Tuesday last week.
The chart is very bearish but there are some signs that the S&P may try to reach the 21 day moving average shortly.
Stock Market Outlook review of Mon Nov 26 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative but rising.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Tuesday Nov 20 2018. The down signal was strong again 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 rising.
- 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 but it is a weak signal which could easily turn into an up signal if the markets move higher on Tuesday. The Slow Stochastic is very oversold.
- 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 from being oversold.
- 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 unchanged on the day which could signal that Tuesday may see the indexes move more sideways than up or down.
- 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 resistance
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 27 2018
The rally on Monday was expected. Markets were very oversold. However the push into the close on Monday signals that Tuesday could start with a dip, but there should be enough momentum from Monday to push stocks still higher on Tuesday.
The technical indicators are showing the correction is possibly preparing to enter a rally for more than a single day as the S&P tries to retake the 21 day moving average and could even try to challenge the 200 day moving average.
Although the general underlying bias is still lower, Tuesday should keep a bias to the upside, once morning weakness is recovered from.
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