The biggest problem with Monday was the inability of the S&P to build any kind of strength for the fourth straight day following Tuesday’s massive rally.
That rally has been given back except for 6 points. The index on Monday continually challenged buyers who kept moving lower. Primarily it is now traders who are buying and selling stocks in the volatility. The market will move lower on Tuesday in search of buyers.
Stock Market Outlook Chart Comments At The Close on Mon Oct 22 2018
The index closed below the 200 day moving average in what was a bearish trading day. Since is the lowest close since Oct 15 when the index closed at 2750.79. That close sparked Tuesday’s massive rally which has now been given back except for 6 points. This is indeed bearish.
The sell signal from the 21 day falling below the 50 day gathered momentum on Monday and could reach the 100 day within a couple of days for a second major sell signal.
The candlestick is bearish for Tuesday.
All the major moving averages are turning lower which is bearish for the market at present.
The Lower Bollinger Band and Upper Bollinger Band are also falling indicating the index is going to move lower.
Stock Market Outlook review of Mon Oct 22 2018
Stock Market Outlook: Technical Indicators Review:
All indicators continue to signal lower as of Monday’s close.
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 Sep 26. The signal was weaker again on Monday but nonetheless it remains a very strong down signal for Tuesday.
- 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.
- 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 for the second straight day.
- 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 turned down on Monday.
- 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.
- 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 resistance
2745 to 2750 are light support
2725 is light support.
2700 is important support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
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 as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Tue Oct 23 2018
All the indicators are pointing lower for the day on Tuesday.
There are no indicators pointing to any upside action for Tuesday and indeed the S&P chart indicates a break of the 200 day should set the index up for a move to challenge the lows from October 11. A test of 2725, which is light support, should happen on Tuesday. The correction looks like it will extend losses further.
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