I had expected the morning on Tuesday to show weakness but the afternoon to rally and end a bit higher for a positive finish. Instead stocks were under pressure the entire day and ended at the lows of the day. Often that sets up the next day for a bounce attempt. Let’s see what the technical indicators from Tuesday’s close advise.
Stock Market Outlook Chart Comments At The Close on Tue Jul 7 2020
The index closed above the 21 day moving average on Tuesday. The closing candlestick however was bearish for Wednesday. The index closed near the day’s low on high volume.
The index is heading out of a Bollinger Bands Squeeze but there are signs the Upper Bollinger Band is rising which means the Squeeze should end with the index moving higher.
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 a rally to a new high or just another rally in a sideways market stuck in a trading range. On Monday it closed at 3145.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is back falling.
- 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 almost gone by Tuesday’s close. Investors could get an up signal on Wednesday.
- 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 but 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 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 and turned negative which indicates lower prices are ahead.
- 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 8 2020
The signals on Tuesday after the close are advising there could be a potential change which investors should watch for.
MACD is still close to issuing an up signal as the Bollinger Bands Squeeze ends.
Normally after a down day such as we saw on Tuesday we can expect a bounce attempt to retake 3150 however there is a lot of weakness for the morning on Wednesday which means while there is the potential for a push higher, there is an equal for another negative close on Wednesday.