On Tuesday the CPI reports were not what investors were hoping for. CPI year-over-year rose reaching 6.4% rather than the 6.2% investors were expecting. Core CPI for the month came in at 0.4% also higher than the expected 0.3%. Core CPI year-over-year came in at 5.6% above expectations of 5.5% but it was still down from the prior reading of 5.7%. Investors decided the number to focus on was the core CPI which was lower than the prior month. Investors decided that this was the number that showed inflation was slowing.
The S&P fell just 1.16 while the NASDAQ rose 68 points. The day ended flat for the S&P and higher for the NASDAQ.
Talk returned throughout the day of a potential “mild recession” rather than a soft landing, as investors now expect further rate hikes to get inflation lower. None of the next rate hikes though are expected to be higher than a quarter of a percent but at least two more rate hikes seemed likely to the majority of investors by the close of trading on Tuesday.
The morning was weak enough though to generate an unconfirmed down signal from the MACD indicator. This is the first down signal from this indicator since Jan 9.
On Wednesday investors get a gauge of how the consumer is faring with retails sales numbers to be released.
Let’s review the closing technical indicators from the SPX on Tue Feb 14 o see what to expect for Wed Feb 15.
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Stock Market Outlook Chart Comments At The Close on Tue Feb 14 2023
On Tue Feb 14 the index closed unchanged. The closing candlestick is below the Upper Bollinger Band but still above the 200 day moving average which is bullish.
The closing candlestick is bearish for Wednesday.
The Upper Bollinger Band is turning higher which is bullish. The Lower Bollinger Band is also turning higher, which is bullish.
The 200 day moving average is flat which is bearish. All the remaining major averages are still rising including the 21 day.
At present there are 2 down signals in place since April 24 and 4 up signals since Jan 13.
The chart is 70% bullish for Wednesday and if retail sales are strong, expect the index to move still higher.
Stock Market Outlook review of Tue Feb 14 2023
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling 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 changed to an unconfirmed down signal. The MACD histogram also turned negative.
- 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.
- 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 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 falling and positive.
- 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:
4250 is resistance
4220 is resistance
4200 is resistance
4180 is resistance
4150 is resistance
4125 is resistance
4100 is resistance
4090 is resistance
4075 is light support
4050 is support
4030 is light support
4025 is light support
4000 is light support
3975 is light support
3965 is light support
3950 is good support
Stock Market Outlook for Tomorrow – Wed Feb 15 2023
Wednesday will be about the retail sales numbers but the weakness as signaled from all the technical indicators could work its way into the market as well. The MACD technical indicator issued a weak down signal at the close on Tuesday. That was the first down since since Jan 9 for this reliable indicator. This down signal though is not confirmed. All the other technical indicators slipped on Tuesday as well.
Normally we should expect a lower day or at the least more selling at times on Wednesday with the change in technical signals, however retails sales, if they are better than expected should turn the market higher. Weaker retail sales will lend itself to the recession scenario and a lower day would be more expected.
Potential Economic and Political Market Moving Events
On Wednesday retails sales numbers are released.
Wednesday:
8:30 January Retail Sales are estimated to be 1.7% up from -1.1% prior
8:30 January Retail Sales excluding motor vehicles are estimated to be 0.7% up from -1.1% prior
8:30 Empire State Manufacturing index for Feb is estimated at -19.2, up from -32.9 prior
9:15 Industrial production index is estimated to be 0.4% for Jan, up from -0.7% in Dec.
9:15 Capacity Utilization rate for Jan is estimated at 79%, up slightly from 78.8%
10:00 NAHB home builders index for Feb is estimated at 36, up from 35.
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