Stock Market Outlook for Wed Apr 7 2021 – Overbought But Bias Is Up

Stock Market Outlook Overbought Bias Up

On Monday, investors reacted to the better than anticipated March unemployment report and pushed all 3 indexes higher. The S&P made another new closing high of 4077 up an impressive 58 points but leaving the index overbought.


Stock Market Outlook Chart Comments At The Close on Tue Apr 6 2021 

The Upper Bollinger Band is continuing to rise which is bullish and the index closed just above it still signaling overbought. This left behind a bullish candlestick for Wednesday. Often this candlestick signals overbought with a chance of a another negative close.

The Lower Bollinger Band is rising but well below the 50 and 21 day moving average which is bullish at present.

The 21 day moving average is climbing higher away from the 50 day moving average which is bullish.

The 50, 100 and 200 day moving averages are all climbing higher.

Overall the S&P chart is very bullish and signaling overbought.

Stock Market Outlook review of Tue Apr 6 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and 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 Monday March 29 2021. On Wednesday the up signal was still strong.

  • 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 and overbought.

  • 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 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 moving sideways and overbought.

  • 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 which signals a chance for unchanged or lower 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:

4050 is light support

4000 is Support

3900 is support and the 50 day is just below this.

3850 is support

3800 is support

3750 is good support and the 100 day is just above this level

3700 is light support

3680 is light support – The 100 day moving average is at this valuation.

3600 is strong support and the 200 day is at this level.


 Stock Market Outlook for Tomorrow – Wed Apr 7 2021 

For Wednesday the technical indicators took a hit on Tuesday and while none are signaling a big down move, some have shifted from up to sideways which is a sign of an overbought market.

The Rate Of Change for Wednesday is signaling that prices may not change much for many stocks.

I had expected a higher close on Tuesday. For Wednesday the outlook is again for a higher close although we will see dips and they could be as steep as was seen on Tuesday. Despite this, even if the index closes negative again on Wednesday, the outlook is overall higher as the primary bias of stocks is up at present.


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