Tuesday’s bounce was great to see and it did bring many of the technical indicators out of oversold signals. It did not though change the market’s underlying outlook of bearish.
Volume was good but did not reflect large volumes of buying. Instead many stocks found ready sellers who took profits in stocks that bounced higher.
The S&P rose 90 points to close at 3764. The NASDAQ rose 271 points to 11069.
It was a good day but it felt more like a “breather” before more selling.
Let’s review Tuesday’s closing technical indicators to see if Wednesday can continue Tuesday’s bounce.
Stock Market Outlook Chart Comments At The Close on Tues Jun 21 2022
On Tuesday the closing candlestick is still bearish and points to Tuesday’s action as a bounce in a bear. Note how the candlestick ended with a shadow. Usually this signals selling will open the following day.
The Upper Bollinger Band is no longer climbing despite the rally. The 200 day is still falling but note how the 100, 50 and 21 day moving average averages are starting to turn sideways.
The lower Bollinger Band is falling which is bearish but also points to a high probability of a bounce.
The bounce could try for a second day but it looks unlikely. If anything the chart looks more like Wednesday will be lower and Thursday could see another attempt to move higher.
There are 4 down signals still in place and there have been no up signals since the start of April.
The chart is 85% bearish for Wednesday and investors should expect more selling.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative. It is signaling oversold.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday June 13. On Tuesday the down signal is still quite strong but did pullback from Friday’s strong showing. The MACD histogram is also negative.
- 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 and no longer oversold.
- 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 and is oversold.
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 no longer oversold.
- 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 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:
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 good support 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 Jun 22 2022
For Wednesday the morning looks weak with the chart indicating selling will return to some extent in the morning. That said, the technical indicators are also moving out of being oversold which may signal that bounce from Tuesday may try to last into Wednesday.
For Wednesday the market is advising investors that Tuesday saw a nice bounce but the outlook is still bearish. We could see a lower close on Wednesday but a further attempt to rise on Thursday.
Potential Market Moving Events
Fed Chair Powell testifies Wednesday and Thursday this week. It is not expected for anything new to be released.
10:00 Existing home sales
9:30 Fed Chair Powell testifies at Senate Baking Committee
8:30 Weekly Initial Unemployment Insurance Claims
10:00 Fed Chair Powell testifies at House Financial Services Committee
10:00 University of Michigan consumer index
10:00 5 year inflation expectations
10:00 New Home Sales