Tuesday saw all three indexes build on the rally from Monday. A dip around 11:00 AM took the index down to around 3080 but instead of the sell-off extending, buyers jumped in and pushed the index back up. The closed was at 3124 for a 58 point gain, adding another 1.9% gain to the index. Let’s look at Tuesday’s technical indicators and see what we should expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Jun 16 2020
The S&P closed below the Upper Bollinger Band again on Tuesday but stayed above the 21 day moving average, the entire day. This left a closing candlestick that is bullish for Tuesday.
The S&P is entering another Bollinger Bands Squeeze which could send the index lower or higher. The Upper Bollinger Band is falling while the Lower Bollinger Band is rising which sets up the squeeze for later this week.
The 100 day moving average is now at the 200 day in what has been a lengthy and slow climb. The 50 day is still climbing toward the 100 day.
There are still 3 major up signals in the chart (see below). The index is moving back toward being bullish.
Stock Market Outlook review of Tue Jun 16 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive.
- 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, but with a reading of minus 8.98, it is still strongly bearish.
- 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 still negative but is rising for a second day.
- 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 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 sharply.
- 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 also 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 Jun 17 2020
Tuesday closed strongly but off the highs of the day. We could see some dips that may end up being a little deeper than expected. A retest of 3100 could definitely occur.
However retail sales numbers jumped 17.7% in May after a 14.7% collapse in April and 8.2% in March. The huge jump in sales, the biggest one month gain on record included a massive 44% leap in auto sales, 188% in clothing, 90% in furniture, 29% in bars and restaurants, 88% in stores with books, music, sporting goods and leisure type activities. These numbers should assist in keeping alive the outlook that the recession will be short and the economy will regain its footing quicker than expected. That will help stocks.
Almost all the technical indicators are bullish. Only MACD continues to show a fairly strong down signal and it remains one of the more accurate technical indicators.
The Slow Stochastic has changed to an up signal, RSI is rising rapidly and the Rate Of Change is also rising, indicating we should see further increases in prices.
Wednesday should end higher but as the index approaches 3190, sellers will be back taking profits and slowing the advance. That could be Thursday’s outlook. For Wednesday we should see the S&P try to retake 3170 to 3175 in what will be a choppy session.
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