Tuesday saw the markets give back Tuesday’s rally and move lower. The NASDAQ had a terrible day, falling 514 points.
The S&P ended the day down 120 points, matching the loss from just last Friday. The S&P closed at 4175 within 25 points of 4150.
Let’s review Tuesday’s closing technical indicators to see what to expect for Wed Apr 27 2022.
Stock Market Outlook Chart Comments At The Close on Tue Apr 26 2022
On Tuesday the closing candlestick shows the index is again oversold. A long bearish candlestick is below the Lower Bollinger Band. This is very bearish. A move down to below 4150 is likely although a bounce first could occur.
A new down signal was issued today which ends the remaining up signals. The 21 day moved back below the 100 day today ending the last up signal. In the past two days investors have faced two down signals from the moving averages.
Tuesday close at the low lines up with the Feb and March sell-offs. Normally this type of retest won’t hold and a lower low follows. The low for the year is at 4114. The close on Tuesday looks set to challenge that low.
Meanwhile the Bollinger Bands Squeeze is over leaving behind a bearish signal with the Lower Bollinger Band falling deeper while the Upper Bollinger Band is struggling to climb. It may turn back down shortly.
The 200 day moving average is no longer rising but still just above 4400.
The 100 day moving average is also dipping lower.
The chart is probably 98% bearish for Wednesday. About the only signal for the bulls is the closing candlestick which points to a chance for a bounce before more selling erupts.
Stock Market Outlook review of Tue Apr 26 2022
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 gained more strength. The histogram also gained strength.
- 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 into 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 down signal in place and is signaling 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 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 falling further.
- 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:
4550 is light resistance
4525 is light resistance
4500 is resistance
4490 is light resistance
4475 is light resistance
4450 is light resistance
4400 is resistance
4370 is light support
4350 is light resistance
4300 is light resistance
4290 is light resistance
4270 was light support
4250 was good support
4225 was light support
4200 is good support
4150 is good support
4100 is light support
4050 is light support
4025 is light support
4000 is good support
Stock Market Outlook for Tomorrow – Wed Apr 27 2022
For Wednesday the technical indicators are all bearish. Many are strongly bearish and are reaching levels where a bounce back normally would occur. Earnings were mixed on Tuesday after the close which is probably not enough to get investors interested in owning stocks at this level, especially if they think stocks will be cheaper shortly.
For Wednesday there is a chance for a bounce but it won’t hold. The day will end lower again with a good chance to break below 4150 to possibly 4125 or 4100. On Wednesday I will be buying more SPY put options for May 20 expiry, this one at the 410 or 400 put strike, especially if there is a bounce.
On Thursday we get Apple, Amazon, Intel, Mercer, Roku and Western Digital. This may not be enough to turn stocks back higher.
On Tuesday there were a number of potential market moving events as listed below with new home sales dipping for the month. On Wednesday we get Pending Home Sales.
Potential Market Moving Events
Tuesday:
8:30 Durable Goods Orders came in at 0.8% which was in-line with estimates and higher than the prior month.
9:00 Case-Shiller US Home Price Index and FHFA Home Price Index (year-over-year) was 19.8% which was higher than estimates and higher than the prior reading.
10:00 Consumer confidence index was 107.3, lower than estimates of 108.5 but well above many analysts expectations.
10:00 New Home Sales dipped to 763,000 from 835,000 which could be a sign housing is starting to slow
Wednesday:
8:30 Pending Home Sales
Thursday:
8:30 Initial jobless claims and continuing jobless claims
8:30 Red GDP first estimate
Friday:
8:30 Employment cost index
8:30 PCE Price Index
8:30 Core PCE price index
8:30 Nominal personal income and consumer spending
8:30 Real disposable incomes and real consumer spending
9:45 Chicago PMI
10:00 University of Michigan consumer sentiment and 5 year inflation expectations
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