Stock Market Outlook for Wed Dec 8 2021 – Overbought, Dips Likely But Bullish

Tuesday saw the rally continue and by the close, all three indexes had their best trading days since March.

The winner on Tuesday was the NASDAQ index which soared 461  points and closed the day at 15,686. The S&P ended the day up 95 points, almost double Monday’s climb, to end the day at 4686.

Let’s review Tuesday’s closing technical indicators to see what we should expect for Wednesday.

Stock Market Outlook Chart Comments At The Close on Mon Dec 6 2021 

The candlestick on Wednesday closed above the 21 day moving average, which is very bullish.

The 21 day moving average is continuing to fall while 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 but there could be a second Bollinger Bands trade this week.

Stock Market Outlook review of Mon Dec 6 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and turned positive today.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Wed Nov 17 2021 . On Tuesday the down signal lost a lot of strength and the histogram is showing a rise coming shortly.

• 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 an up signal for Wednesday.

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 and moving away from oversold signals. It is nearing the overbought readings.

• 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 further and will become overbought on Thursday.

• 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:

4700 is resistance

4655 is resistance

4600 is good support

4550 is light support

4525 is light support

4500 is support

4490 is support

4475 is support

4450 is support

4400 is support

4370 is light support

4350 is light support

4300 is light support

 Stock Market Outlook for Tomorrow – Wed Dec 8 2021 

For Wednesday the index is flashing overbought signals after three strong days of rallying.

It will be a choppier day for stocks, with deeper dips but a higher close on Wednesday.

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