Tue Jan 29 2019 saw stocks stuck in a very tight trading range as investors waited for Apple earnings and for the interest rate decision from the Fed. Wednesday’s market direction will be all about the Fed, but it’s worthwhile taking a look at the closing technical indicators to see what may happen in the days immediately after the Fed interest rate announcement on Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Jan 29 2019
The S&P chart is still bearish with 6 sell signals.
The first sell signal was Oct 17 and the second sell signal was Oct 26. Both of these are off the 3 month chart, but I left the info on the chart as a reminder.
What we are now seeing is both the 50 day and 100 day moving averages falling away from the 200 day. This is a bearish signal advising caution that we could see a further dip coming up. Meanwhile the 21 day moving average is rapidly rising which is a good sign for stocks. The 21 day could easily move above the 50 day this week, if the Fed decides to leave interest rates unchanged. If this happened it would be the first buy signal since Oct 17th’s sell signal.
The closing candlestick on Tuesday was bearish for a second day. Meanwhile the Upper Bollinger Band is falling back and the Lower Bollinger Band is moving higher. We might see a Bollinger Bands Squeeze later this week which could signal either a move higher, or, more likely, a move lower. We will know more as the days unfold this week.
Overall the S&P chart remains bearish.
Stock Market Outlook review of Jan 29 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and was rising on Tuesday.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Fri Jan 4 2019. That up signal was weaker again today.
- 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 signal is rising.
- 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 stronger down signal in place for Wednesday is still 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.
- 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 also 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 Resistance Levels To Be Aware Of:
2900 was support – this will be strong resistance
2860 was support – this will be resistance
2830 was light support and will be light resistance
2800 is strong resistance
2795 is light resistance
2745 to 2750 is light resistance
2725 is light resistance
2700 is resistance
2675 is light resistance
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
2300 has the most support at present but would represent a full correction of 641 points as a drop to this level would be 21% and just 5% away from a full bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Wed Jan 30 2019
Overall on Wednesday it will be the Fed’s decision on interest rates that determine immediate market direction. I am expecting no rate increase but Fed Chair Powell has not be the best at explaining Fed decisions as we saw Oct 4 when his comments sent stocks falling and subsequent conversations did little until just recently, to stop the selling. Therefore the Fed could decide not to raise rates but make a statement that still sends stocks lower. A rate increase will tumble stocks unless there is a firm indication, black and white, stating no more increases for 2019. The chance of that happening is nil, therefore the outlook for Wednesday is probably lower. If the Fed says little negative and does not raise rates, the indexes should move higher.
Despite what the Fed does, once the movement from the Fed is over, the underlying conditions of the market will return as the primary mover. At present those conditions are bearish unless stocks can break above 2650 and close higher for several days. Otherwise stocks risk testing the 2600 level once again in the near future.
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