A little more weakness was seen on Tuesday morning but the best dip of the day at 11:00 AM was quickly bought into and stocks continued their advance. By the close the S&P was up 24 points for a 1% gain to 2574. The S&P is now within striking distance of the 2600 level.
Stock Market Outlook Chart Comments At The Close on Tue Jan 8 2019
The S&P chart is still bearish with 6 sell signals but the S&P spent the entire day above the 21 day moving average on Tuesday a good sign for the bulls. Meanwhile the 50 and 100 day moving averages are starting to turn back up which could be an early signal for the bulls.
Note how the Upper Bollinger Band is still falling lower and the Lower Bollinger Band is rising. This could be a new signal to the upside for a few days still before either the index enters a Bollinger Bands Squeeze or the S&P moves back lower.
The closing candlestick on Tuesday is another reversal candlestick which could mean a down day is near which wouldn’t be unusual considering how high and strong the rally has been since the Dec 24th sell-off.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising.
- 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 stronger 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 an up 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 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 light resistance
2620 is light resistance
2600 is strong resistance.
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 9 2019
For Wednesday the reversal candlestick is showing for a second straight day. It’s rare for this to happen and for the S&P to continue to climb higher. So while the outlook is higher for Wednesday, there is still a good chance for a better dip in the markets as well.
The problem is those investors not into stocks are looking for every opportunity to jump in and dips are opportunities, no matter how small. We saw that happen on Tuesday morning when the 11:00 AM dip was quickly snatched up and stocks rose further.
On Wednesday, watch for stocks to dip, but overall the outlook is still higher. 2600 should prove more difficult to retake for the S&P.
Stock Market Outlook Archives