Stock Market Outlook for Wed Aug 18 2021 – Potential Bounce But A Lower Close

Tue Aug 17 2021 saw investors react to lower than expected retails sales, disappointing auto sales and concerns that the Delta variant may affect consumer spending more than originally estimated. Selling started at the open and continued through to 1:00 when the SPX reached the 4420 level, which is the 21 day moving average. That move brought in buyers who pushed back for the rest of the day and saw the index close at 4448. down 31 points on the day.

Let’s look at the closing technical indicators from Tuesday to see what to expect for Wed Aug 18 2021

Stock Market Outlook Chart Comments At The Close on Tue Aug 17 2021 

On Tuesday the S&P fell to the 21 day moving average, the first dip to the 21 day since August 3. The drop left behind a bearish candlestick for Wednesday.

Note that the Lower Bollinger Band moved above the 50 day moving average on Tuesday.  The Upper Bollinger Band is dropping back and there is a good chance we will see another Bollinger Bands Squeeze as early as this week.

All the major moving averages are still climbing which is bullish. For Wednesday the candlestick and Bollinger Bands are negative.

Stock Market Outlook review of Tue Aug 17 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 Thursday Aug 12 2021. On Tue Aug 17 2021 the up signal was almost gone.

• 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 and is 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 a down signal in place and is very 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 and no longer 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 sharply which indicates we should see further price changes on Wednesday, up or down.

• 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:

4475 is resistance

4450 is resistance

4400 is light support

4370 is support

4350 is light support

4300 is light support

4290 is light support

4270 is light support

4250 is good support

4225 is light support

4200 is good support

4175 is light support

4150 is light support

4100 is good support

4070 is light support

4050 is light support

4000 is good support

3900 is support

3850 is support

3800 is support

3750 is good support

3700 is light support

3680 is light support

3600 is strong support

 Stock Market Outlook for Tomorrow – Wed Aug 18 2021 

For Wed Aug 18 2021 there is a strong chance of a rebound or a bounce but there is still some further selling ahead, whether it is on Wednesday or Thursday.

The SPX is still overbought but with all the technical indicators now pointing lower, a bounce is very likely.

The biggest concern now will be whether we get a sell signal on Wednesday from the Moving Average Convergence / Divergence technical indicator and whether a Bollinger Bands Squeeze is about to start.

Wednesday will be choppy, with a bounce but a potential for a lower close.

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