Tuesday saw the break we had expected after 6 straight days of gains and numerous new highs. Losses were minor at 4 points down and the close was still above 3900.
Stock Market Outlook Chart Comments At The Close on Tue Feb 9 2021
The S&P moved slipped just slight on Tuesday. The tight trading range left behind a neutral candlestick for Wednesday. The Upper Bollinger Band is continuing to rise while the Lower Bollinger Band is falling lower. This is bullish for further advances in the index.
The 21 day moving average is rising and is above the 3800 valuation. The 200, 100 and 50 day moving averages are still climbing with the 100 day moving average now above the 3600 valuation and the important 200 day moving average at 3450. These are strong indicators the market will continue to push to new highs this week.
Wednesday could see more sideways action but the chart remains bullish.
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 Fri Feb 5 2021. On Tue Feb 9 2021 the up signal was stronger.
- 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 near overbought but has turned sideways indicating not a lot of upside is expected on Wednesday.
- 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 and is very overbought but also signaling we could see a switch to down shortly.
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 moving lower which indicates prices are not expected to climb much on Wednesday.
- 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:
3900 is resistance
3850 is support
3800 is support. The 21 day moving average is just above 3800 at present.
3750 is support and where the 50 day moving average is at present.
3700 is light support
3600 is strong support and where the 100 day moving average is at present
3550 is support
3500 is strong support
3450 is support and where the 200 day moving average is at present. A drop this low would represent an 11% correction.
Stock Market Outlook for Tomorrow -Wed Feb 10 2021
For Wednesday the neutral candlestick on Tuesday’s close is pointing to a potential down day.
While most of the indicators are pointing higher, three are showing signs of further weakness which could translate into a further dip on Wednesday.
Another choppy day is also expected as shown by the dip lower by Rate Of Change and the Relative Strength Index (RSI) technical indicators.
For Wednesday then, watch for the index to on and try to climb, run into sellers and move back below to 3900. From there I expect that will be the day’s low and despite more volatility on Wednesday I expect the index will try to climb but end the day slightly lower.