Monday saw markets around the world react to the Russian incursion into Ukraine. On the S&P, the index fell 44 points to close at 4304 but intraday it fell to 4267. Lows are getting closer to the January 24 intraday low of 4222 during the day on Tuesday. The close on Tuesday though, is the lowest close of this correction and below the close of all the dips in January.
The NASDAQ lost 1.23% to close down 166 points at 13,381. This is just above the close on January 27 when the NASDAQ ended the day at 13,352,
Selling was steady and the VIX index jumped to 32.04 but ended the day at 28.81 up just 3.8% on the day as there remains a high degree of complacency still in the market. Basically investors believe stocks will recover shortly.
Let’s review Tuesday’s close to see what Wednesday’s trading will look like.
Stock Market Outlook Chart Comments At The Close on Tue Feb 22 2022
On Tuesday the index traded below the 200 day for a second day and closed below it for a third day this month. The candlestick has shadows on both the top and bottom. This shows the indecision from investors at the close as they tried to decide which way the market would end the day. Normally investors can expect a bounce attempt.
The Upper Bollinger Band has bounced off the 100 day on Friday. This can be seen as bullish but it needs a couple more days to prove it can rise. At present that seems unlikely and the Upper Bollinger Band looks ready to fall below the 100 day moving average which would be another down signal. The Lower Bollinger Band is turning lower, an indication of more selling ahead. This is currently bearish.
The 21 day moving average on Tuesday is back falling. This is bearish.
The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is hanging on which is bullish.
The chart has two down signals in place and the index could see the 21 day fall below the 200 day this week. If that happens the January lows probably won’t hold. A lot depends on the Russia-Ukraine crisis as well as comments from the Fed and inflation numbers. Investors could easily get spooked which can send the index lower.
The chart is very bearish. It still looks set to send the index below the lows from late January, down to the 4200 level. That’s a guess which is not backed by any technical indicator at present. An invasion of Ukraine with the index this low could see 4200 quickly reached or even broken. From there 4000 would be easy to reach. That though could mark a low.
The SPX chart is very bearish and investors should stay cautious.
Stock Market Outlook review of Tue Feb 22 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a confirmed down signal on Thursday Feb 17 2022. On Tuesday the down signal gain more strength. The MACD histogram turned decidedly bearish. More downside is predicted.
- 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 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.
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 now into oversold readings but with plenty of room to fall further before being extremely oversold.
- 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 indicating we could see bigger price swings in stocks 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:
4600 is resistance
4550 is resistance
4525 is resistance
4500 is resistance
4490 is light resistance
4475 is light resistance
4450 is light support
4400 is good support and the 200 day moving average
4370 is light support
4350 is light support
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
Stock Market Outlook for Tomorrow – Wed Feb 23 2022
For Wednesday the index is signaling a bounce is near but the bounce won’t hold. There are still too many unknowns for the market to be able to hold rally highs. That means every rally is suspect of falling back. I will be continuing to buy SPY put options on rally spikes.
All the technical indicators are signaling that the market has further to fall before bottoming. It could though be near a bottom especially if the Ukraine-Russia crisis ends with no further invasion of Ukrainian territory. At present that seems unlikely.
The index drop on Tuesday came close to reaching the January intraday low. We could see another drop and a break of that low on Wednesday. At the same time there are clear indications on Tuesday evening that the index will be bouncing on Wednesday morning before it sells lower.
Don’t forget Wednesday is the final day of the President’s Day Membership Sale. This sale ends at midnight on Wednesday, eastern standard time. For interested investors this is a chance to get a membership at a discount price, to assist navigating what looks like a rough 2022. It’s a chance to see what FullyInformed.com has to offer to profit during 2022 despite the market gyrations. For existing members this is a chance to renew terms from one to twenty-four months. The 24 month special membership won’t be offered again this year. That plan slashes the membership cost by a full 30%, saving $500 and reducing the monthly cost to just $48.66. Wednesday is the final day.
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