On Tuesday jitters over further crackdowns on Chinese companies by the Chinese government sent some investors to the exits.
The day ended negative with a loss of 20 points. The S&P closed at 4401 but well off the day’s low of 4372.
Despite the S&P slipping, the MACD technical indicator confirmed Monday’s up signal.
Let’s review the technical indicators at the close on Tuesday to see what investors should expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Jul 27 2021
On Tuesday the S&P came close to falling back to the 21 day moving average but the dip saw a bounce back. The index closed just below the Upper Bollinger Band but left behind a bearish candlestick for Wednesday.
The Upper Bollinger Band is now starting to climb again while the Lower Bollinger Band is swinging higher and moved above the 50 day moving average. These signals are normally bullish but the index is very overbought so a dip is still likely.
All the major moving averages are still climbing which is bullish.
Stock Market Outlook review of Tue Jul 27 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged and still positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Mon Jul 26. The up signal was confirmed 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 falling and overbought.
- 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 still has an up signal in place and is 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 falling indicating we could see less movement in prices on Wednesday.
- 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:
4400 is resistance
4370 is resistance
4350 is light support
4300 is light support
4290 is light support
4270 is light support
4250 is light support
4225 is light support
4200 is light support
4175 is light support
4150 is light support
4100 is good support
4070 is light support
4050 is light support
4000 is good support
3900 is support
3850 is support
3800 is support
3750 is good support
3700 is light support
3680 is light support
3600 is strong support
Stock Market Outlook for Tomorrow – Wed Jul 28 2021
The weakness on Tuesday is not unusual and was expected. If you look at the support and resistance levels in the chart above, you can see that 4400 is resistance. It will take time for the index to build strength to move above 4400. Note how today the index closed at 4401. As well, 4370 is also resistance and note again how today the S&P slipped to 4372 before rebounding. In time the index will move above these levels but not until there is support. At present the first level of support is at 4350 which is just light support.
By the close on Tuesday we have a mixed outlook with MACD confirming Monday’s up signal and the Slow Stochastic still pointing up. The other indicators are all slipping lower except for momentum which is basically drifting sideways. On Wednesday watch for further dips but earnings from Apple, Microsoft and Alphabet will add some stability to the index.
The chance remains for Wednesday’s mixed outlook to turn into a positive close but considering how overbought the index is, a second day of selling would also not be a surprise.
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