The technical indicators has pointed to some weakness to start Tuesday off, but not a drop as dramatic as we saw. With more analysts jumping on the recession band-wagon investors returned to selling early on Tuesday but as the noon-hour ended selling dried up and buyers returned sending the indexes higher and back to positive closes.
The S&P closed up 6 points to end the day at 3831. Intraday the S&P was down at 3742 early morning.
The NASDAQ closed up 194 points to end the day at 11,322. Intraday it was at 10,911.
It was a dramatic reversal but let’s check Tuesday’s closing technical indicators to see what they predict for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Jul 5 2022
On Tuesday the closing candlestick is bearish. It indicates caution and advises that Tuesday reversal might be just a bounce before further selling.
The newest concern in the SPX chart is the Upper Bollinger Band collapsing and now reaching the 100 day moving average and the Lower Bollinger Band starting to rise. This could be a strong bearish signal. We will know more as the index heads into Friday.
All the moving averages are falling with the 50 and 21 day now falling rapidly. This is quite bearish.
There are no bullish signals for Wednesday in the chart.
There are 4 down signals still in place and there have been no up signals since the start of April.
The chart is 100% bearish for Wednesday. Often a chart with a 100% bearish rating will see a bounce higher before more selling. A contrarian move is common with strong bearish as well as strong bullish signals.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged and 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 Monday June 27. On Tuesday the up signal gained strength as did the MACD histogram.
- 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 an up signal in place for Wednesday.
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 and is finally positive.
- 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 which often indicates the bounce won’t hold.
- 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:
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is strong resistance
3975 is light resistance and is a decline of 17.5%
3900 is light resistance and is a decline of 19%
3850 is light resistance and is a decline of 20%
3825 is light support
3800 is good support.
3775 is light support
3750 is light support
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Wed Jul 6 2022
The rally on Tuesday afternoon which reversed the losses was great to see. The technical indicators though are not supporting a move higher. Indeed the S&P chart is 100% bearish. Often though, a signal this strong, is followed by a further bounce before there is more selling.
The technical indicators remain mixed but a bit more hopeful than the SPX chart itself. There has not been an up signal in the SPX chart since April. That’s more than two months which is a strong bearish trend.
Another primary concern at present is the Bollinger Bands signaling a possible further selling either late this week or into next. As well the 50 and 21 day moving averages are falling rapidly which usually indicates more downside still is ahead.
For Wednesday we are looking at a mixed outlook with a possible further bounce attempt but a high chance of a lower close.
Note in the market moving events below that factory orders came in much higher than expected which is seen as potentially inflationary. On Wednesday the latest FOMC minutes are released at 2:00. Watch for swings in the market on Wednesday in the half hour before and after 2:00 PM.
Potential Market Moving Events
For the first week of July the biggest event in on Friday when the June unemployment report is released.
10:00 Factory orders came in at 1.6% which was well above estimates of 0.6% and the prior month’s 0.7%. In other words, potentially inflationary.
2:00 FOMC minutes
8:30 Weekly Initial Unemployment Insurance Claims
8:30 June nonfarm payroll report are expected to show 250,000 jobs created