As expected, Tue Dec 14 2021 saw the indexes falls on investors continue to fret about inflation and how fast the Fed will react in their decision on Wednesday. Stock indexes did bounce at the open which lasted the first 15 minutes. From there the bears took over and selling was steady until the lunch hour. By then the S&P was down to 4606 or effectively the 4600 support level. This is good support for the index and once the selling slowed and the index failed to break below 4600, buyers moved back in and spent the afternoon pushing stocks higher. The close saw the S&P up at 4647 by 3:30 which was met by a flurry of sell orders into the close. The index closed at 4634, down 34 points on the day or three-quarters of a percent.
The NASDAQ closed down below the 50 day moving average and intraday it broke the 100 day. The index lost 175 points for a 1.14% loss on the day.
With the Fed’s decision now due on Wednesday by 2:00 let review the closing technical indicators from Tuesday to see what we might expect on Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Dec 14 2021
The closing candlestick on Tuesday was once again bearish but it also points to a potential pop for Wednesday.
On Tuesday the index almost touched the 50 day moving average. That resulted in a bounce back and a close well off the day’s low. The index closed at the 21 day moving average which is bullish for a potential move above the 21 day on Wednesday.
The index closed down at the 21 day moving average which is bearish but at the same time, it signals a bounce attempt is likely off the 21 day. For Tuesday though any bounce off the 21 day looks poor.
The 21 day moving average is still turning higher which is bullish. The other remaining major moving averages, namely the 50, 100 and 200 day are still climbing. This is bullish.
The Bollinger Bands Squeeze is over. The Lower Bollinger Band is falling and the Upper Bollinger Band is starting to rise. These are bullish signals.
Overall the chart is more bullish than bearish for Tuesday.
Stock Market Outlook review of Tue Dec 14 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a confirmed down signal on Wed Nov 17 2021 . On Tuesday, the signal was again negative which ended the potential up signal for now. The MACD histogram is also back falling.
- 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.
- 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 for tomorrow.
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.
- 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 also falling.
- 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:
4725 is resistance
4700 is resistance
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Wed Dec 15 2021
For Wednesday all the technical signals are pointing lower for stocks. Often that means there is a chance the index is wrong and the market experiences a bounce. On Wednesday there is a chance for a bounce in the morning. From there, the afternoon will belong to the Fed.
There is strong support at the 4600 valuation followed by the 4550. Tuesday’s pullback should not have any lasting effect beyond Tuesday. For Wednesday the day once more, belongs to the Fed. The language of the Fed’s decision Wednesday afternoon will be as important as the dates when interest rates are expected to rise. If rates rise too quickly, investors should prepare for a pullback in stocks. I don’t think that will be the case.
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