On Tuesday morning stocks slipped to just below 3880 on the SPX but then began to recover from yesterday’s comments by Atlanta Fed President Raphael Bostic. In a dramatic turn, all 3 indexes ended the day higher putting concerns about rising interest rates on the “back burner”.
The S&P rose 27 points to close at 3919 but the move higher was actually from a lot of 3877. This meant the SPX rose 42 points from the lows on Tuesday.
The NASDAQ rose 106 points to close at 10742.
Probably the most important technical event on Tuesday was the SPX MACD up signal from Monday was confirmed on Tuesday.
Let’s review the closing technical indicators from the SPX on Tue Jan 10 to see what to expect for Wed Jan 11.
Stock Market Outlook Chart Comments At The Close on Tue Jan 10 2023
On Tue Jan 10 the S&P closed above the 21, 50 and 100 day moving averages which is bullish. The day ended at the highs on Tuesday which often will see some weakness the following morning at the open, but normally this will be an opportunity to setup trades for a move higher.
The closing candlestick is bullish for Wednesday.
The Upper Bollinger Band is turning sideways which is bearish. The Lower Bollinger Band is turning sideways which is also bearish and could be preparing for a potential Bollinger Bands Squeeze this week.
The 200 and 100 day moving averages are falling which is bearish but the 21 day is turning back up and the 50 day is moving higher and could push above the 100 day on Wednesday or Thursday for a major up signal.
At present there are are 6 down signals in place since April 24 and no up signals.
The chart though is 65% bearish for Wednesday which is much stronger for the bulls.
Stock Market Outlook review of Tue Jan 10 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 was confirmed on Tue Jan 10. The histogram also is now positive and climbing.
- 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 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 and rising sharply.
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 nearing overbought readings which is a good sign for the bulls.
- 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 and nearing 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:
4050 is resistance
4030 is resistance
4025 is resistance
4000 is resistance
3975 is resistance
3965 is resistance
3950 is resistance
3925 is resistance
3900 is resistance
3875 is resistance
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
3685 is light support
Stock Market Outlook for Tomorrow – Wed Jan 11 2023
For Wednesday, stocks have more strength which favors a move higher. The SPX closed at the highs of the day on Tuesday which usually means we will see a dip on Wednesday at or near the open. I will be using the dip to setup trades as the outlook is still higher for stocks on Wednesday. The MACD up signal was also confirmed on Tuesday and the majority of the technical indicators are bullish and rising. Wednesday will be choppy but end higher.
Potential Economic and Political Market Moving Events
On Wednesday there are no economic reports which should assist stocks in moving higher. On Thursday investors get the Core CPI reports and continuing jobless claims which will probably move markets. On Friday we get the University of Michigan 1 and 5 year inflation outlooks. Thursday and Friday therefore could be quite choppy.
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