On Tuesday stocks bounced back after a three-day trouncing.
The S&P rose 81 points points for a gain of 1.78% to end the day at 4649.
The three days of selling lost 200 points for the S&P. Tuesday’s bounce recovered 40%. Even if this was nothing more than a bounce in a downtrend, we should see a second bounce to recover another 10% or 20 points as most bounce attempts recover 50% of the original decline before restarting the downtrend.
The NASDAQ jumped 386 points on Tuesday to close at 15341.
The three sell-off days lost the NASDAQ 231 points. Tuesday’s rally recovered all of that and another 155 points or 67% more. That’s unusual for a bounce that is simply going to fail. In other words, Tuesday’s bounce in the NASDAQ should have restarted a move higher for stocks in both indexes.
The outlook has improved dramatically in just one day thanks to investors pulling back on their fear of what omicron could cause plus news that the Democrats may be still trying to recover their Build Back Better bill.
Let’s review the closing technical indicators from Tuesday to see what to expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Dec 21 2021
The closing candlestick on Tuesday is bullish. Usually we will see a dip in the morning but the bounce should continue and move higher, according to the closing candlestick.
The 21 day moving average is still falling and the Lower Bollinger Band has reached the 100 day moving average, both of which are bearish.
Meanwhile the 50, 100 and 200 day moving averages are still climbing which is bullish.
For Wednesday the chart is bullish enough to see the index climb higher for a second day.
Stock Market Outlook review of Tue Dec 21 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down up signal on Fri Dec 17 2021 . On Tuesday, the down signal lost quite a lot of strength but is still pointing lower.
- 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 rising.
- 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.
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 rising.
- 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
4670 is support
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 22 2021
The massive Tuesday rally has set up Wednesday for a weak opening and probably a dip which could be as deep as 4625 or worse case, 4615. That though should be the end of any selling Wednesday morning.
The close should see the index recover from morning weakness and move higher by the end of the day as a second bounce takes the SPX probably to 4670.
Stock Market Outlook Archives
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