Tue Jul 31 2018 saw markets enter a much anticipated bounce after successive days of selling especially in tech stocks on the NASDAQ.
Some signs of concern on Tuesday included the Dow pulling back from an interim gain of 184 points to close up 108 points and the gain on the NASDAQ was rather anemic at 41 points after losing 385 points over the prior 4 trading days.
Despite this it was still good to see an up day and with Apple earnings possibly juicing the market for Wednesday, there might be room for one more day of advancing stocks. Let’s take a look.
Stock Market Outlook Chart Comments At The Close on Tue Jul 31 2018
The S&P ended the day on Monday above 2800 at 2816. The closing candlestick is referred to as a bullish reversal and often signals a change from the pullback.
All the major moving averages are still rising.
The Bollinger Bands are continuing to signal the index will move higher but there are some very early signs of a possible Bollinger Bands Squeeze starting to get setup.
The SPX chart is still bullish but a break of the 21 day moving average should it happen on Wednesday, would turn the chart short-term bearish.
Stock Market Outlook review of Tue Jul 31 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and moving sideways.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued an up signal on July 9. Today, Tue Jul 31 2018 Moving Average Convergence / Divergence issued an unconfirmed sell signal.
Ultimate Oscillator: 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. The Ultimate Oscillator signal is positive and moving sideways.
Slow Stochastic: 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. The Slow Stochastic is no longer overbought and has a strong down signal for Wednesday.
Relative Strength Index: 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. The RSI signal is rising.
Rate of Change: 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. The rate of change signal is positive but moving sideways which indicates no change in prices is expected.
Support Levels To Be Aware Of:
2795 is light support
2745 to 2750 is light support
2725 is light support.
2700 is support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Wed Aug 1 2018
The bullish reversal candlestick is a good sign for Wednesday although without the strong earnings from Apple Stock it is questionable if the market would have moved higher.
The technical indicators are almost overwhelmingly uncommitted to the bounce we saw on Tuesday. Most of the technical indicators are moving sideways. MACD continued to decline and issued a sell signal for Wednesday although it is not confirmed.
The market looks like it will move sideways and keep a slightly higher bias by the close on Wednesday.
However unless there are further catalysts to the upside, Thursday will see the index move back lower and selling resume.
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