Monday saw all 3 indexes open lower but on very low volume. This embolden buyers and the markets did not see the morning opening low again intraday. Instead the markets moved sideways until the final hour. Stocks shot higher and the S&P recovered the 3900 level to close up 26 points at 3899. The NASDAQ rose 86 points to end the day at 11535.
The biggest concern about Monday was the low volumes. Much of the low volume was caused by investors following the funeral of Queen Elizabeth II of England. That is what I was doing for the morning on Monday.
With the Fed set to report another interest rate hike on Wednesday this week, Tuesday could see some selling but also an attempt to close higher above 3900.
Let’s review the closing technical indicators from Monday’s close to see what to expect for Tuesday.
Stock Market Outlook Chart Comments At The Close on Mon Sep 19 2022
There are a couple of bullish signals as of the close on Monday. The closing candlestick is bullish for Tuesday.
However the closing candlestick also indicates that Monday was simply a bounce.
The 21 day moving average continued its descent but of some interest is the Bollinger bands which are continuing to show signs of a potential Bollinger Bands Squeeze after the Fed’s interest rate announcement. This squeeze could see stocks move higher.
All the moving averages are turning lower which is bearish.
There are now 4 down signals in place since April and no up signals.
The chart is 90% bearish for Tuesday.
Stock Market Outlook review of Mon Sep 19 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is risingg and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Monday the down signal lost strength. The histogram also lost some strength. Both signals though remain very bearish.
- 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 rising and negative.
- 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 rising above oversold readings.
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 and leaving oversold readings behind.
- 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 at its lowest reading since the June sell-off but it is starting to rise.
- 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:
4250 is stronger resistance
4220 is light resistance
4200 is strong resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is light support
3925 is light support
3900 is strong support
3875 is light support
3850 is good support
3825 is light support
3810 is good support
3800 is light support
Stock Market Outlook for Tomorrow – Tue Sep 20 2022
For Tuesday the technical indicators are slightly more bullish, although they are still showing strong bullish readings. There is a chance for a dip back Thursday morning at the open but then a move sideways and into the close another attempt to push above 3900.
We could see dips down to 3865 or 3870 but enough strength is evident which indicates a close above 3900 would not be a surprise. The candlestick for Monday though points to a possible weak day for Tuesday as much of Monday’s bounce was an oversold condition with low trading volume.
Potential Market Moving Events
The biggest market moving event is on Wednesday this week when Fed Chair Powell announces another rate hike. I will be putting together a trade ahead of that announcement. The goal will be to profit no matter which way the SPX moves after the announcement, up or down.
Monday:
10:00 NAHB home builders index which is expected to be 47. It came in at 46 which most analysts felt was a decent number for home-builders.
Tuesday:
8:30 Building Permits
8:30 Housing starts
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