Stock Market Outlook for Wed Feb 1 2023 – All About The Fed

On Tuesday investors bought back into the same stocks that on Monday were being sold. By the end of the day volumes were higher than Monday’s sell-off and the S&P recovered all the loss while the NASDAQ came within a few points.

The S&P rose 58 points closing at 4076. The NASDAQ rose 190 points to close at 11,584.

Today all eyes are on the Fed but the technical indicators will have some impact especially after Tuesday’s recovery rally which shows the bulls are very much alive.

Let’s review the closing technical indicators from the SPX on Tue Jan 31 to see what to expect for Wed Feb 1 2023, the first day of February.

Stock Market Outlook Chart Comments At The Close on Tue Jan 31 2023 

On Tue Jan 31 2023 the S&P traded higher and closed once again above the 200 day moving average.

The closing candlestick is bullish for Wednesday, although it also signals the index is overbought.

The Upper Bollinger Band is rising which is bullish. The Lower Bollinger Band is also rising which is also bullish.

The 200 day moving average is rising which is bullish. All the major averages are now rising.

The 21 day moving average moved above the 50 day for a third up signal on Monday.

At present there are are 3 down signals in place since April 24 and now 3 up signals.

The chart is 65% bullish for Wednesday.

Stock Market Outlook review of Tue Jan 31 2023

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 an up signal on Monday Jan 9. The up signal gained strength on Tuesday as did the histogram.

• 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 and on the verge of signaling 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 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 rising and on the verge of signaling 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 falling and positive.

• 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:

4125 is resistance

4100 is resistance

4090 is resistance

4075 is resistance

4050 is resistance

4030 is resistance

4025 is resistance

4000 is light support

3975 is light support

3965 is light support

3950 is good support

3930 is light support

3900 is good support

3875 is light support

3850 is good support

3830 is good support

3810 is light support

3800 is good support

3775 is good support

3750 is good support

3730 is light support

3725 is light support

3715 is light support

3700 is good support

 Stock Market Outlook for Tomorrow – Wed Feb 1 2023 

The technical indicators are shifting back to the bullish side once again, following Tuesday’s snap back rally. Trading volume was higher on Tuesday which signals there are more bulls back buying into stocks.

Today though will be all about the Fed’s 2:00 PM interest rate announcement and the Fed Chair’s news conference at 2:30. The majority of analysts expect a 25 basis point hike and another 25 basis point hike in February. They do not expect the Fed to be dovish but instead expect a very hawkish tone. Stocks will initially bounce on a quarter point rate hike but probably dip back on hawkish comments but if the interest rate is a quarter point, investors will look at this as the beginning of the end of interest rate hikes. The market will rally after the news conference. On the other hand if the Fed raises rates half a point and is hawkish for further rate hikes that could be half a point, the market will sell lower. However I am not expecting a sell-off to have much legs at this point. Tuesday’s rally showed investors believe stocks will move higher shortly, even though many are overbought and are pushing higher PEs.

For Wednesday whatever happens, the bulls should be able to contain any selling and indeed may end up snapping up stocks if there is any kind of major drop.

Potential Economic and Political Market Moving Events

Only one event matters today and that is the Fed’s interest rate announcement and subsequent news conference.

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