My outlook for Tuesday was certainly off. I had expected a drop in the morning but not to the extent we saw and I had expected a rally back to a positive close. Instead Treasury yields rose and Goldman Sachs Stock (GS) stunned the markets with a plunge. That was all it took to get selling started. By the end of the day the indexes were only slightly off their lows.
The S&P lost 86 points to close at 4577 for a 1.8% loss. The NASDAQ again saw the heavier selling with a loss of 387 points to 14,506.90, a 2.6% decline. The S&P closed at its 100 day moving average while the NASDAQ closed below the 200 day which is the first break of the 200 since April 2020.
Let’s review the technical signals from Tuesday’s close on the SPX to see what they are advising for Wed Jan 19.
Stock Market Outlook Chart Comments At The Close on Tue Jan 18 2022
The closing candlestick on Tuesday is bearish for Wednesday. It does however point to a potential bounce, especially with the index now at 100 day moving average.
The Upper Bollinger Band is still trying to rise which is a bullish signal. The Lower Bollinger Band is starting to fall again, which at present is now bearish.
The 21 day and 50 day moving averages are falling which is bearish.
The 100 day is no longer climbing which is neutral. Only the 200 day moving average is rising which is still bullish.
For Wednesday the chart is bearish. A bounce could occur but the likelihood of selling being over is slim to almost none. The S&P looks set to test its 200 day moving average shortly. A bounce will delay that.
Stock Market Outlook review of Tue Jan 18 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and is negative. It is showing oversold and ready to bounce.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Thursday Jan 6. On Tuesday the down signal gained more strength. The MACD histogram is at a point where we often can expect a bounce.
- 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.
- 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 not oversold.
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 oversold. Often we can expect a bounce shortly.
- 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.
- 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:
4800 is resistance
4725 is resistance
4700 is support
4670 is support
4655 is light support.
4600 is good support
4550 is light support
4525 is light support
4500 is support
Stock Market Outlook for Tomorrow – Wed Jan 19 2022
On Wednesday there is a possible bounce attempt setting up but overall the technical indicators are advising caution and protection. The NASDAQ is below the 200 day moving average and should attempt a bounce but has further to fall. The S&P is at the 100 day which should assist a bounce and the technical indicators are advising a potential bounce is possible, but more selling lies ahead as the SPX is likely to test the 200 day 1 moving average which is down at the 4400 level.
I will be using any bounce on Wednesday to close trades for profits and setup trades to the downside.
Stock Market Outlook Archives
Stock Market Outlook for Wed Apr 24 2024 – Some Weakness But Higher Close
Morning Investing Strategy Notes for Tue Apr 23 2024
Stock Market Outlook for Tue Apr 23 2024 – Bounce But Lower
Morning Investing Strategy Notes for Mon Apr 22 2024
Stock Market Outlook for Mon Apr 22 2024 – No Change – Deeply Oversold Bounce Possible
Morning Investing Strategy Notes for Fri Apr 19 2024
Stock Market Outlook for Fri Apr 19 2024 – Deeply Oversold – Bounce Likely – Higher Close
Morning Investing Strategy Notes for Thu Apr 18 2024
Stock Market Outlook for Thu Apr 18 2024 – Deeply Oversold – Bounce Attempt Expected
Morning Investing Strategy Notes for Wed Apr 17 2024
Stock Market Outlook for Wed Apr 17 2024 – Another Bounce Attempt
Morning Investing Strategy Notes for Tue Apr 16 2024
Stock Market Outlook for Tue Apr 16 2024 – Deeply Oversold
Morning Investing Strategy Notes for Mon Apr 15 2024
Stock Market Outlook for Mon Apr 15 2024 – Expect A Bounce
