Stock Market Summary for Tue May 22 2018
The outlook for Tuesday was for stocks to continue to try to advance. I was expecting the S&P to push to try to reach 2750 where I had expected heavy selling to start around the 2745 valuation. The S&P did push higher and made it to 2742 and then ran into sellers. The day though was still going well until comments from President Trump that a summit meeting with North Korea might not take place, sent stocks lower. The Dow Index saw the worst selling and closed down almost 200 points.
Closing Statistics from Tue May 22 2018
The S&P fell 8.57 to 2724.44
The NASDAQ Composite fell 15.58 to 7378.46
The Dow Jones Industrial Average fell 178.88 to 24,834.41
Stock Market Outlook Chart Comments At The Close on Tue May 22 2018
The S&P closed slightly lower on Tuesday leaving behind a bearish candlestick for tomorrow.
The 21 day moving average however is now above all the major moving averages which is a major buy signal for the index.
The 200 day moving average is still climbing. Overall the chart continues to look bullish.
Stock Market Outlook review of Tue May 22 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and moving sideways.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.MACD (Moving Averages Convergence / Divergence) issued an up signal on May 7. The up signal was still fairly strong on Tuesday.
Ultimate Oscillator: 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. The Ultimate Oscillator signal is positive but lower.
Slow Stochastic: 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. The Slow Stochastic has an up signal in place and is overbought.
Relative Strength Index: 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. The RSI signal is falling but more sideways than actually lower.
Rate of Change: 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. The rate of change signal is falling but it too is more sideways than falling.
Support Levels To Be Aware Of:
2745 to 2750 was light support
2725 is light support.
2700 is support.
2675 is light support.
2650 is light support
2620 is light support
2600 is strong support.
There is good support at the 2550 level from where the market bounced back from the recent correction low on Feb 9.
The S&P has light support at 2480. It also has light support at 2450 and good support at 2425. Below that there is some support at 2400, 2380, 2350. 2300 has the most support at present but would represent a full correction as a drop to this level would be 20% and just 5% away from a potential bear market signal.
Stock Market Outlook for Tomorrow – Wed May 23 2018
Looking at the technical indicators, they are not actually falling after Tuesday’s afternoon decline. Instead they are moving more sideways than down. This indicates that Tuesday’s selling was a knee-jerk type reaction by investors and not based on any fundamental change to the markets.
Wednesday will be choppy but any kind of positive news on North Korea will send stocks racing back up.
Investors who are not into stocks at present prices are waiting for dips and they may get one on Wednesday. However overall, the outlook has not changed despite the drop on Tuesday.
A negative close is expected and trading will be choppy, as previously mentioned, but Thursday or Friday should see stocks move higher. For Wednesday then, expect a choppy day and a lower bias unless the “positive” news I mentioned above, happens.
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