Stock Market Outlook for Tue Sep 22 2020 – Possible Bounce Attempt But More Selling Likely

The outlook for Monday was for a possible bounce attempt. Instead investors focused on news that the UK may revert to a second shut down due to a rise in Covid-19 cases. This brought about the obvious question of whether such a lock-down could occur here at home. Investors returned to selling and pushed both the S&P and NASDAQ lower. Late in the day however, a rally ensued and the NASDAQ closed down just 11 points on the day and the S&P was down 38 points. Let’s review Monday’s closing technical indicators to see what might occur on Tuesday.

Stock Market Outlook Chart Comments At The Close on Mon Sep 21 2020 

On Monday the index fell to the 100 day moving average but bounced off of it. However it closed below the 50 period moving average for the second day.

The closing candlestick is bearish but once again, it is also typical of a signal to watch for a potential bounce.

The index has now been trading below the 21 day moving average for 10 straight days without being able to climb back above it. This is very bearish.

The Lower Bollinger Band is falling dramatically lower and could cross below the 100 day shortly which would be bearish. The Upper Bollinger Band is starting to rise.

The 21 day moving average is turning lower.

The 50, 100 and 200 day moving averages are still climbing. There are still 6 up signals and two down signal caused when the Lower Bollinger Band moved above the 100 day moving average back on July 27 and on Aug 31 above the 50 day. The SPX chart is more bearish than bullish.

Stock Market Outlook review of Sep 21

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and at oversold levels.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Sep 4. On Monday the down signal was stronger again.

• 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 moving sideways.

• 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 and is 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 falling and nearing 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 also falling indicating lower prices are still 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 and Resistance Levels To Be Aware Of:

3600 is resistance

3500 is resistance

3450 is resistance

3400 is resistance

3375 is resistance

3300 was 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 Sep 22 2020 

For Tuesday the technical indicators are signaling more downside should be expected. There is a good chance for a potential bounce but at present more selling will follow any bounce. Therefore a bounce is an opportunity to take profits and then prepare for the next dip which could possibly reach the 200 day moving average which currently is around 3125.

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