Stock Market Outlook for Wed Aug 25 2021 – Sideways But Up Bias Still In Place

On Tue Aug 24 2021 the markets continued Monday’s advance with the S&P rising to 4492 before sellers in the final half hour sent the index lower to close up 6 points at 4486. Even with the end of day drop on Tuesday, the close was still a new closing high.

The NASDAQ rose 77 points for another new high, ending the day at 15019.

Let’s review Tuesday’s close to see what technical changes occurred and what investors should expect for Wednesday.

Stock Market Outlook Chart Comments At The Close on Tue Aug 24 2021 

The most important signal in the chart is still the Bollinger Bands Squeeze. You can see in the squeeze that Tuesday’s candlestick ended the day at the Upper Bollinger Band which is beginning to show signs it is ending as the Lower Bollinger Band is falling while the Upper Bollinger Band is rising. The closing candlestick on Tuesday is bearish for Wednesday, which considering move the past 4 trading days the SPX has added 119 points is not surprising as a rest in the rally would not be unusual.

All the major moving averages are still climbing which is bullish. For Wednesday the SPX chart remains bullish.

Stock Market Outlook review of Tue Aug 24 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is trending sideways and positive.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wednesday Aug 18. On Tuesday the down signal lost half of its strength from Monday’s reading.

• 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 trending sideways for a third day.

• 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 strong up signal in place.

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 rising.

• 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 indicating we should not expect prices to rise as strongly as we saw on Monday.

• 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:

4490 is resistance

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 25 2021 

For Wed Aug 25 2021 the technical indicators are signaling a sideways movement may be coming up on Wednesday or Thursday as the index consolidates recent gains.

Moving Average Convergence / Divergence (MACD) indicator lost half of yesterday’s down signal and most likely we will see a new up signal by Thursday’s close. The other signal to watch is the Relative Strength Index (RSI) which rose again on Tuesday but just slightly, which is another signal that the index may consolidate gains and then move above 4500.

If there are dips on Wednesday, no matter how deep, they are still opportunities to setup trades. Thursday we get the Jackson Hole symposium with Powell speaking on Friday. On Friday we also get the personal consumption expenditures which the Fed likes to use as an inflation gauge. As well on Friday we get the University of Michigan consumer sentiment readings. A break on Wednesday would set the index up for another push higher for the final two days of the week.

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