Stock Market Outlook for Wed Jan 6 2021 – Bounce Is Suspect

Bounce Is Suspect

Tue Jan 5 2021 saw markets stage a rebound which recovered slightly more than half of the losses sustained on Monday. By the close, the S&P was up 26 points and ended the day at 3726.


Stock Market Outlook Chart Comments At The Close on Tue Jan 5 2021 

On Tuesday the index closed above 21 day moving average although it dipped down to it, a couple of times during the day. However each dip lower was met by buyers. The action on Tuesday left behind a green candlestick that often signals a bounce day, before more downside.

The Bollinger Bands Squeeze continues to be in play. The major moving averages are still rising and the up signal from Oct 21 is still in play but the break of the 21 day on Monday needs to be watched for any further bearish signals. For now, the drop on Monday could be a one day event although the closing candlestick on Tuesday is advising there is more downside ahead.

Stock Market Outlook review of Tue Jan 5 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and back positive.

  • Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a a down signal on Dec 10. The down signal was stronger on Tuesday by the close despite the overall market rising.

  • 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 trending sideways.

  • 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 rising.

  • 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.

  • 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:

3750 is resistance

3700 is light support

3600 is strong support

3550 is support

3500 is strong support

3450 is support

3400 is support

3375 is support

3300 is strong support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is strong support


 Stock Market Outlook for Tomorrow – Wed Jan 6 2021 

For Wednesday the signals are more mixed but a number have returned to the upside. Overall though, with the run-off elections in Georgia, investors are waiting for the results and that could be the deciding factor for Wed Jan 6 2021. If Democrats take both seats, watch for the market to sell lower.


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