Stock Market Outlook for Tue Oct 13 2020 – Morning Weakness Possible, But Higher Close

On Monday I had expected a higher day but with low volume and not as strong a rally due to Columbus Day. Instead indexes shot higher with a strong day. The S&P closed up 57 points for a 1.6% gain. The index closed at 3534 just 54 points from the all-time high of 3588.

Stock Market Outlook Chart Comments At The Close on Mon Oct 12 2020

On Monday the index closed above both the 21 and 50 day moving averages and above the Upper Bollinger Band. The closing candlestick was bullish for Tuesday but the close above the Upper Bollinger Band shows the index as very overbought.

The Upper Bollinger Band is still turning higher and the Lower Bollinger Band is falling lower, which is bullish.

The 200, 100 and 50 day moving averages are climbing.

The 21 day moving average is also turning higher. If it crosses above the 50 day this week, it will be very bullish heading into the end of October.

There are still 6 up signals and 3 down signals. The SPX chart is continues to gain a stronger bullish stance.

Stock Market Outlook review of Mon Oct 12 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and 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 Oct 1. On Monday the up signal was stronger.

• 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 is 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 an up signal in place and is extremely 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 rising into overbought readings.

• 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 indicating further upside in prices is probable.

• 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:

3600 is resistance

3500 is resistance

3450 is light support

3400 is support

3375 is support

3300 is support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is support

2975 is light support

2950 is light support

2900 is light support

 Stock Market Outlook for Tomorrow – Tue Oct 13 2020 

For Tuesday, the index is very overbought and there are a number of signals advising we could see a dip on Tuesday either to start the day or in the morning.

Any dip though will find buyers. I will be watching for opportunities in any dips on Tuesday.

The outlook remains fairly unchanged. There will be weakness but the index is positioned to still close higher on Tuesday.

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