Tuesday started off with a shocker of an inflation report but instead of falling at the open stocks rose as investors questions whether this is the worst of inflation and it should begin to fall from here. There was even talk among analysts that the Fed may not raise interest rates at each meeting this year. Obviously this was conjecture but it was enough to get a bump higher. Unfortunately by 10:00 AM the rally was over and stocks wound their way lower. As buyers pulled back and some prior buyers quickly dumped stock they had just bought the index fell quickly in the afternoon. Volume rose after 1:00 PM and the index fell still further and broke through the 4400 level. As the index fell below 4400 selling volume slowed and the index slipped first to 4381 and then rebounded to almost reach 4400 again. While the day was definitely bearish, the decline over the past two days has now pushed the index into strong overbought signals. We could see another rally attempt on Wednesday.
The S&P lost 15 points to close at 4397. The NASDAQ lost 40 points to close at 13,371.
Let’s review Tuesday’s closing technical indicators to see what to expect for Wed Apr 13 2022.
Stock Market Outlook Chart Comments At The Close on Tue Apr 12 2022
A new up signal was issued by the 21 day moving above the 100 day on Tuesday. This ends three of the prior sell signals. The only sell signal that needs to be reversed is for the 50 day to move back above the 100 day.
Meanwhile the Bollinger Bands are now entering a squeeze which may look ominous to the downside but could instead send the index back higher shortly.
The closing candlestick on Tuesday is again bearish but also is signaling there is a bounce potential building. If the market should fall again on Wednesday I would expect a bounce on Thursday.
The 200 day moving average is rising above the 4400 level which is bullish. The 50 day moving average has still not climbed back above the 100 day and the 100 day is still moving sideways.
The chart is about 60% bearish and 40% bullish for Wednesday despite the decline again and the loss of the rally on Tuesday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling 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 Friday April 8. On Tuesday the down signal was stronger. The histogram is also strongly negative.
- 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 and on the verge of entering oversold readings.
- 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 strong 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 deeper into 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 rising indicating we should see a higher change in prices on Wednesday.
- 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:
4650 is resistance
4640 is resistance
4625 is resistance
4600 is strong resistance
4590 is resistance
4575 is light resistance
4560 is light resistance
4550 is light support
4525 is light support
4500 is support
4490 is light support
4475 is light support
4450 is light support
4400 is support
4370 is light support
4350 is light support.
4300 is good support
Stock Market Outlook for Tomorrow – Wed Apr 13 2022
The loss of the rally on Tuesday was disappointing but it was not a strong rally and it had limited buying interest as members will see tonight in the Market Breadth Indicators.
The closing candlestick is a mix. Often this candlestick precedes one more big down day before a bounce. At the same time, it often see a second bounce attempt after a prior bounce has been lost.
Despite Tuesday’s selling, the technical indicators in the SPX chart are becoming more bullish and the new up signal on Tuesday after the close is also bullish for Wednesday.
With a number of technical indicators now signaling oversold and the new up signal on Tuesday, there is a good chance for a second bounce attempt on Wednesday.
On Tuesday the SPY calls I bought Monday at the close were sold by 10:00 AM for a very nice profit.
At the close on Tuesday I bought SPY call options again. If there is no bounce I may average them lower waiting for a potential bounce either later on Wednesday or if there is no bounce Wednesday, then I expect one on Thursday.
Potential Market Moving Events
CPI was the big number and it was a stunner at 8.5% for the year versus 7.9% for the prior annual report. Monthly CPI was 1.2% in March, which was higher than 0.8% in February. If inflation has topped out, these numbers don’t support that theory yet.
Producer Price Index
8:30 Initial Jobless claims and continuing jobless claims
8:30 Retail sales
10:00 University of Michigan consumer sentiment index
10:00 University of Michigan inflation expectations
10:00 Business Inventories
3:50 Cleveland Fed President Mester speaks
6:00 Philadelphia Fed President Harker speaks
8:30 Empire state manufacturing index
9:15 Industrial production index