Stock Market Outlook for Wed May 29 2019 – More Selling and Lower

Tuesday May 28 saw stocks start the day with a rally and then fall lower. Within the first half an hour the S&P had already made the day’s high. Unable to break through 2840, sellers showed up and the index spent the rest of the day working its way lower.

In the afternoon selling increased and the index hits its highest volume level of the month as the S&P slipped to close just 2 points above the 2800 support level.

Stock Market Outlook Chart Comments At The Close on Tue May 28 2019 

On Tuesday the index closed below the 100 day moving average. The 21 day moving average is just below the 50 day after Tuesday’s selling. This is the first sell signal from the moving averages in 3 months.

The candlestick at the close pointed to another bearish day for Wednesday. As well the Lower Bollinger Band is now below the 2800 valuation and continuing to fall. A move below the 200 day will signal further downside for the overall market.

The chart at the close on Tuesday is quite bearish and points to more downside to come.

Stock Market Outlook review of Tue May 28 2019

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is negative and rising.

• 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 gained strength pointing to more downside ahead.

• 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 falling and still moving lower.

• 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 signal is pointing down for stocks but is into oversold readings which normally point to a bounce.

• 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 and starting to enter oversold readings.

• 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 and at oversold signals.

• 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 resistance

2860 is light resistance

2830 is light resistance

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 29 2019 

For Wednesday the outlook is for the market to struggle to hold the 2800 level. The opening will be below the 2800 level, which could spark a bounce attempt which will fail but will probably get back over 2800.

There should be a number of attempts to hold the 2800 level but without positive news on the “trade war” front, investors will continue to take profits and move to the sidelines.

Technical indicators are starting to flash oversold readings and a bit more downside will see more extreme oversold signals. From there we will see a bounce, but that’s later in the week or even into next. Until then the S&P looks set to close below 2800 on Wednesday.

A catalyst to the upside is needed. Without one, the index will continue to move lower.

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