Tuesday saw the S&P open at 3050 and by 11:30 investors had retaken the 3080 level. From there the bears seemed to simply disappear as the index started the afternoon with a slight dip down to 3070 which immediately found buyers. By 3:00 PM the index was back above 3080 and that seemed to signal an “all-in” for the final hour as volume jumped and the index broke through 3100 before ending the day at 3100.
Stock Market Outlook Chart Comments At The Close on Tue Jun 30 2020
The index closed at the 21 day moving average on Wednesday for the first time in 5 trading sessions. The strong close on Tuesday left behind a bullish candlestick, but also a signal advising some weakness on Wednesday to start the day.
The index is still in a Bollinger Bands Squeeze but with no clear signal either up or down as the index comes out of the squeeze.
There are now 6 up signals and no down signals in the chart.
The index is back to the standard form of the 21, 50, 100 and 200 day format which is typical of a bull market. The market still has to retake the 3200 level and push higher to confirm whether this is the start of a rally to a new high or just another rally in a sideways market stuck in a trading range.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is sideways and neutral.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday June 12. The down signal was weaker on Tuesday.
- 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 back 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 a weak 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 and Resistance Levels To Be Aware Of:
3200 is resistance
3150 is resistance
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
2860 is light support
2840 is light support
2800 is good support
2725 is light support
2700 is light support and marked a drop of 20.4%.
2675 is light resistant
2650 is light support
2625 is light support
2600 is support
2550 is light support
2500 was good support and marked a correction of 26.3%
2344 is the next level of support and marks a 30.9% correction.
2191 was the market low on March 23
2100 is light support
2000 is good support and marks a drop of 1393 points for a 41% correction. Some analysts still believe the index will fall this low in the second half of 2020.
Stock Market Outlook for Tomorrow – Wed Jul 1 2020
The end of the day on June 30 marked the best quarter for the S&P since 1998. The index gained 20% in the quarter thanks to the rally back from the March market collapse. The Dow Jones had its best quarter since 1987 and the NASDAQ, which rose 30.6% for the quarter, marked the best quarterly gain since 1999. Much or some may say, most of the gain was a direct result of quantitative easing on a scale never seen before at the height of the market collapse. Whatever the case, the chance the market will slip back to the March lows is extremely slim. The bears have been unable to send the market lower as each large dip has quickly found buyers who recover stocks to rally levels.
Historically the first day of July has been positive in 27 of the last 31 years with an average of half a percent rise in the index.
The past two-day rally has the index back into a solid uptrend. Wednesday should start with a slight dip based on the candlestick at the close of trading on Tuesday. From there the index will immediately find buyers and with the technical indicators above pointing to more upside action, Wednesday should end higher. Thursday investors get the May non-farm payroll numbers which are expected to show further improvement in the numbers employed and the bond market closes early which is often bullish. Friday is the start of the long Independence Day holiday weekend. The next two days should be positive for stocks.