The drop of stocks on Tuesday has analysts calling for a retest of the March lows. It is though, too early for anyone to predict with any certainty. In the rush to always “be first to call it”, analysts create an atmosphere of worry for investors. My email this evening was overflowing with investors wondering if this was the start of a second collapse in the markets. No one has any certainty. Everything is a prediction or a “feeling”. I believe the selling is a result of the rally pushing stocks too high and overvaluing them combined with the collapse of oil. The collapse itself is not as important as the fact it is a catalyst which investors are using as an “excuse” or “reason” to take profits.
Stock Market Outlook Chart Comments At The Close on Tue Apr 21 2020
The SPX chart continues to be bearish with 6 sell signals in the chart. On Tuesday the index opened below 2800 and spent the entire day trading below 2800. It closed at 2736.
The 200 day moving average is now leading the market, which is typical in a bear market. It is followed by the 100 day and the 50 day. The 21 day is turning back up which if it could continue to climb would be good for the bulls, but for now, this looks like a bounce in that moving average.
The closing candlestick on Tuesday is bearish for Wednesday. At present the Upper Bollinger Band is starting to fall back toward the Lower Bollinger Band which could set the index up for another Bollinger Bands Squeeze. This one might see stocks move lower. We should know more toward the end of the week.
Stock Market Outlook review of Tue Apr 21 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and still 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 Thursday March 26. The up signal is growing weaker.
- 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 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 a down signal in place and is signaling 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 falling.
- 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 sideways pointing to not much change in prices.
- 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:
2900 is resistance
2860 is resistance
2840 is resistance
2800 is resistance
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. More analysts are jumping onto this level as where the correction is heading.
Stock Market Outlook for Tomorrow – Wed Apr 22 2020
For Wednesday we will probably see at least one if not more attempts to bounce back but the chance of the index closing above or even at 2800 is slim to none.
The day should be a bit more volatile and the chance of the index falling below 2700 is high. The close will be lower on Wednesday despite any bounce attempt as sellers will take advantage of every bounce on Wednesday to lighten up on stocks and raise cash levels.
Stock Market Outlook Archives
Stock Market Outlook for Thu Apr 18 2024 – Deeply Oversold – Bounce Attempt Expected
Morning Investing Strategy Notes for Wed Apr 17 2024
Stock Market Outlook for Wed Apr 17 2024 – Another Bounce Attempt
Morning Investing Strategy Notes for Tue Apr 16 2024
Stock Market Outlook for Tue Apr 16 2024 – Deeply Oversold
Morning Investing Strategy Notes for Mon Apr 15 2024
Stock Market Outlook for Mon Apr 15 2024 – Expect A Bounce
Morning Investing Strategy Notes for Fri Apr 12 2024
Stock Market Outlook for Fri Apr 12 2024 – All About Bank Earnings
Morning Investing Strategy Notes for Thu Apr 11 2024
Stock Market Outlook for Thu Apr 11 2024 – Weakness and Lower
Morning Investing Strategy Notes for Wed Apr 10 2024
Stock Market Outlook for Wed Apr 10 2024 – All About The CPI Numbers
Morning Investing Strategy Notes for Tue Apr 9 2024
Stock Market Outlook for Tue Apr 9 2024 – Morning Weakness Possible But Higher Close
