Tuesday saw the indexes stage a rally back. Volume was low but the indexes managed strong gains which were broad-based. The S&P was up 22 points to close at 2834 on Tuesday as it stayed above the important 2830 support level.
Stock Market Outlook Chart Comments At The Close on Tue May 14 2019
On Tuesday the index climbed and closed at the Lower Bollinger Band, in-between the 100 day and 50 day moving averages.
The 21 day moving average is turning lower and the 50 day is beginning to weaken but the 100 and 200 day moving averages are still climbing.
The candlestick on Tuesday signals a bounce but not a resumption of the uptrend. The Bollinger Bands Squeeze is ending as the Upper Bollinger Band is moving away from the Lower Bollinger Band. The move higher by the Upper Bollinger Band has a good chance it is signaling that the next move might be back up, at least for a day or two.
The chart is bearish and still looks more like the index will slip lower and this time fall below the 100 day.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative but also rising. 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 Wednesday May 1. On Tuesday the down signal was stronger again and indicating oversold.
- 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 signal is rising and back 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 down signal in place and is still 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 indicating 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 falling also oversold.
- 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 Resistance Levels To Be Aware Of:
2950 is resistance
2900 is light support
2860 is light support
2830 is light support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
2675 is light support
2650 is support
2625 is light support
2600 is support.
There was good support at the 2550 level which is back to being support.
The 2500 level is support.
The S&P has light support at 2480 and better support at 2450.
There is good support at 2425.
Below that there is some support at 2400, 2380, 2350.
Stock Market Outlook for Tomorrow – Wed May 15 2019
The technical indicators are still signaling a strongly oversold market and that could help stocks climb higher on Wednesday.
I had expected selling on Wednesday but this may not be the case as the indicators are still very oversold. We may see another day where there will be weakness but the underlying tone is still up for stocks.
The selling is not over, but the technical indicators are pointing to more bounce to the rally and then a move lower. Therefore we may see weakness and a higher close on Wednesday and then selling on Thursday. Be prepared for dips though, on Wednesday but by the close, stocks should be higher.