Stocks came back to life, particularly the NASDAQ on Tuesday. Intraday new highs were made by the Dow once again but the last 45 minutes on all 3 indexes selling erupted and sent the indexes well off their highs.
The Dow in particular which had been at 32,150 fell back to close up just 30 points at 31832, a loss of 318 points. The S&P rose to 3903 intraday but then closed at 3875 a drop of 28 points. Still, the SPX managed to close up 54 points.
The NASDAQ had an exceptional day closing up 464 points to 13073.
Stock Market Outlook Chart Comments At The Close on Tue Mar 9 2021
The Bollinger Bands Squeeze has continued to widen on Tuesday as you can see in the chart below. This is bullish for the index. The closing candlestick on Tuesday is bearish for Wednesday, certainly for the open.
You can see in the chart that the index bounced off the 50 day moving average in what was a technical bounce. Usually this kind of bounce is followed with selling.
The 21 day moving average is now moving lower and could fall below the 50 day by the end of the week if there is more selling. That would be the first major sell signal since the up signal of Oct 21.
The 100 and 200 day moving averages are climbing higher.
While the chart does show the SPX is facing some trouble, the index still has not broken below the lows of Jan 29 and Feb 1. In other words, so far this is a normal correction in an ongoing bull market. Wednesday though could be weaker.
Stock Market Outlook review of Tue Mar 9 2021
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising but still slightly negative..
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Mon Feb 23 2021. On Tuesday the down signal weakened for a third straight day.
- 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 for a second straight day.
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.
- 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:
4000 is resistance
3900 is resistance
3850 was support is now light resistance.
3800 is support
3750 is good support and has assisted in keeping the selling in check
3700 is light support
3680 is light support – The 100 day moving average is at this valuation.
3600 is strong support
3550 is support
3500 is strong support
3450 is support. The 200 day moving average is just above this valuation. A drop this low would represent an 11% correction.
Stock Market Outlook for Tomorrow – Wed Mar 10 2021
For Wednesday we could see the indexes stumble a bit with more choppy trading action following Tuesday’s big gains.
Much of the rally on Tuesday was caused by the a technical rebound for both the S&P and the NASDAQ. The NASDAQ in particular has been badly damaged and was deeply oversold by 10%. The bounce on Tuesday recovered 40% of the losses. Normally a bounce can recover 50% to even 60% before turning back down.
Wednesday will see dips, some deeper than expected with a lot of choppy trading but the bias is higher for the day.
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