On Wednesday, the S&P made another new closing high and new intraday high but just barely. Sellers are continuing to take profits and buyers are refusing to give up. The index started to drift on Wednesday but the bias up remained unchanged. Let’s review Wednesday’s close to see if Thursday can break higher or lower.
Stock Market Outlook Chart Comments At The Close on Wed Apr 7 2021
The Upper Bollinger Band is continuing to rise which is bullish. The index on Wednesday closed at the Upper Bollinger Band which is a signal of an overbought market. This on its own however does not signal a down day coming up. Markets can stay overbought for lengthy periods of time. The closing candlestick on Wednesday is neutral for Thursday. This is not unusual and often is typical after a rally and then a sideways move for a couple of days in the index.
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 for a second straight day.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising again 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 Monday March 29 2021. On Wednesday the up signal was very 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 to neutral signal in place and is extremely 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 rising which means we should see some change in prices on Thursday which means another very tight close is unlikely, up or down, for Thursday.
- 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:
4070 is very light support
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 – Thu Apr 8 2021
The technical indicators are signaling that the market is very overbought but that does not mean the index cannot climb still further. The Moving Average Convergence / Divergence signal is strongly bullish and the Rate Of Change signal is advising that Thursday won’t see another sideways type day.
The rally has slowed over the past two days and with the index overbought, there is a chance Thursday could end negative.
However, while the technical indicators show the index as possibly closing slightly negative for Thursday I think we will see a higher close and then Friday could be lower. It should be interesting to see which way the index closes on Thursday but no matter how it closes, the market is in a bullish stance. The Fed on Wednesday indicated no change in their outlook or in the support for the economy and thereby the markets. With that kind of support, the bulls have more room to push stocks higher.