Monday saw stock indexes tumble in the afternoon on “bad Covid-19 news”. Tuesday saw stocks rebound from the selling on the back of better than expected earnings from JP Morgan Chase and Citigroup. For Wednesday there is excellent news from Moderna as they indicated after hours that its vaccine produces antibodies to coronavirus. Wednesday should move higher on the news.
Stock Market Outlook Chart Comments At The Close on Tue Jul 14 2020
The index closed above the 21 day moving average again on Tuesday and reached the Upper Bollinger Band. The closing candlestick is bullish for Wednesday.
The 21 day on moved higher and the Bollinger Bands Squeeze which has been ongoing since June 23 appears ready to start to end with the index pushing higher.
There are now 6 up signals and no down signals in the chart.
The 50 day moving average is climbing still further, which is readily seen in the chart. The 100 day is also climbing further above the 200 day.
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 a rally to a new high or just another rally in a sideways market stuck in a trading range. At present the index is ready to push above 3200.
Stock Market Outlook review of Tue Jul 14 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is sideways.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday July 8. That up signal was stronger 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.
- 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 down signal in place and is very 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 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 sideways still indicating changes in prices are coming.
- 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 support
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 15 2020
News from Moderna on their vaccine progress is excellent and will be enough to jump start a rally on Wednesday.
The technical indicators are also strong enough to suggest that the next move will be higher for the index and the Moderna news will be the spark on Wednesday.
As expected yesterday in the Market Direction outlook, bank earnings surprised to the upside despite Wells Fargo Stock (WFC) and that was enough to keep investors from selling on Tuesday. Wednesday morning we also get the earnings from Goldman Sachs Stock (GS). If they beat estimates this will help put a floor under any selling and push the index still higher.
The market continues to be driven by Covid-19 news and that won’t change for some time yet, but for Wednesday the news is good and the outlook is higher.
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