Sellers took control again on Tuesday in a rather wild session which saw the indexes end the day at their respective lows.
The S&P gave back 33% of Tuesday’s gain while the NASDAQ gave up 58% of Monday’s huge rally.
Stock Market Outlook Chart Comments At The Close on Tue Mar 2 2021
The S&P was under selling pressure right from the open. The index fell back below the 21 day to end the day at the lows. Normally we would expect to see a bounce to start the next day and then more selling.
The candlestick is bearish for Wednesday.
The biggest change is the Bollinger Bands Squeeze which now appears imminent. This could mean a larger dip is coming up for the index to possibly test the 100 day this week.
The 21 day moving average is trying to turn back up while the remaining 50, 100 and 200 day moving averages are all climbing higher.
Overall the market is showing some strength at technically the Bollinger Bands Squeeze and the close on Tuesday are bearish signals at present.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and 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 was much stronger.
- 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.
- 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.
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 rising indicating changes will be seen in prices again on Wednesday.
- 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 is support.
3800 is support.
3750 is support
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 3 2021
There should be a bounce especially near the open on Wednesday but overall there are more signals to the downside than upside as of Tuesday’s close.
Stay cautious until we see a clearer signal one way or the other. Wednesday though looks like a rally and then another move lower. The Rate Of Change is indicating that prices are going to change. It is not predicting up or down, just that any change will be dramatic. Looking at the SPX Chart I would think we will see prices change to the downside.