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Stock Market Outlook for Wed Feb 14 2024 – Bounce Expected

Feb 14, 2024 | Stock Market Outlook

Stock Market Outlook bounce expectedPrior Trading Day Summary:

On Tuesday the CPI numbers came in hotter than expected and that was all it took for the overbought market to sell-off. As is typical, are stocks moved lower more sellers joined in and that lead to a 68 point drop for the SPX for a loss of 1.37% to close at 4953. What was interesting about Tuesday was how the sell-off came within a few points of the 21 day moving average and then bounced to close right at the 4950 support level. This same 4950 valuation has held the SPX from steeper dips for weeks. It was not surprising to see the day end at 4950. It was also not surprising to see how quickly the index tumbled below 5000 as there has been no serious testing of that level since the index moved above it. Volume on the SPX jumped to 4.4 billion shares. 91% of all volume was being traded to the downside. 86% of al stocks were falling.

The NASDAQ lost 286 points on volume of 5.8 billion shares traded. 81% of all volume was to the downside and 78% of all stocks were falling. The index closed at 15655.

Let’s review Tuesday’s sell-off closing technical indicators to see what to expect for Wed Feb 14 2024.


Stock Market Outlook: SPX Closing Chart For Tue Feb 13 2024

The index fell to the 21 day moving average and bounced off it. It closed just above it and below the Upper Bollinger Band.

The closing candlestick is bearish for Wednesday but also signals that a bounce should be expected.

The 21 day moving average is moving higher which is bullish. It is near 4915 on the SPX.

The 50 day moving average is rising and nearing 4800 which is bullish.

The 100 and 200 day moving averages are climbing which is bullish. The 200 day is at 4500 on the SPX which is bullish.

The Lower Bollinger Band is rising awhich is bullish but the Upper Bollinger Band is turned sideways which is bearish.

The S&P chart is still more bullish than bearish for Wednesday despite Tuesday’s major sell-off.

Stock Market Outlook review of Tue Feb 13 2024


Stock Market Outlook: Technical Indicators Review

Momentum: Momentum is falling and still 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 Tue Jan 23 2024. On Tue Feb 13 2024 the up signal lost strength and could issue a down signal on Wednesday if the SPX closes 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 falling and positive. It is almost negative.

  • 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 falling and turned negative.

  • 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 signaling Wednesday will see some selling.

  • 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.

Stock Market Outlook: Support and Resistance Levels

5050 is resistance
5025 is resistance
5010 is resistance
5000 is resistance
4990 is resistance
4975 is resistance
4950 is resistance
4925 is resistance
4915 is resistance
4900 is resistance
4875 is resistance
4850 is resistance
4825 is support
4815 is support
4800 is support
4780 is support
4750 is support
4720 is support
4700 is support
4675 is support
4650 is support


Stock Market Outlook for Wed Feb 14 2024 

After the selling on Tuesday, the indexes are oversold. A bounce is likely on Wednesday. The SPX is no longer overbought following the steep decline on Tuesday but often these types of events will see a bit more selling before investors regain their footing.

If you look at the CPU numbers below under the heading “Tuesday” you can see that the CPI numbers showed inflation is remaining fairly steady. The CPI numbers did however show inflation is not rising rapidly, but it is not dropping quickly either.  Overall I did not think the inflation numbers were bad but they didn’t show the weakness investors need to see an interest rate cut by the Fed anytime soon.

Many investors were still of the opinion the Fed would drop interest rates in March, despite the Fed indicating they would not. Tuesday’s CPI number cemented the no-rate decrease for March and investors acted accordingly by selling. Typically, as selling erupted, nervous investors joined in and dumped shares “to get out” of the market. This is typical and we have seen it hundreds of times in the past. But CPI numbers also showed the economy is in good shape and unemployment continuing to stay low. This is helping many companies beat earnings estimates. Overall I thought the selling was overdone on Tuesday.

For Wednesday expect a bounce attempt. The first attempt normally fails but downside is also limited in the face of a strong economy. I therefore expect a lower day on Wednesday but the bulk of the sell-off was over on Tuesday.


Potential Economic and Political Market Moving Events

Inflation on Tuesday with CPI reports and on Thursday a myriad of economic reports will have the most impact this week.

Monday:

No reports that will impact stocks

Tuesday:

8:30 Consumer prince index is expected to drop to 0.2% from 0.3% but instead stayed at 0.3%

8:30 Core CPI is expected to be unchanged at 0.3% and came in as expected.

8:30 CPI year-over-year is expected to have fallen to 2.9% from 3.4% but instead fell to 3.1%

8:30 Core CPI year-over-year is estimated to have fallen to 3.7% from 3.9% but instead stayed at 3.9%

Wednesday:

Two Fed Officials speak but there are no economic reports that will impact stocks.






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