On Tue May 4 2021 the S&P saw heavy profit-taking. Comments from Treasury Secretary Janet Yellen that interest rates may need to rise was the catalyst behind the selling but the market was also positioned for a drop after struggling since mid-April to push convincingly higher. On Tuesday the SPX ended the day at 4164 for a loss of 28 points.
Stock Market Outlook Chart Comments At The Close on Tue May 4 2021
The Upper Bollinger Band is falling and the Lower Bollinger Band is rising as a new Bollinger Bands Squeeze is in effect. At present the outlook for the squeeze is negative but that could easily change.
The closing candlestick on Tuesday is bearish for Wednesday. However note how the index on Tuesday slipped below the 21 day moving average before closing back just above it. Normally a slip like that leads to a bounce attempt.
The 21 day moving average is climbing higher, further away from the 50 day moving average which is bullish.
The 50, 100 and 200 day moving averages are all climbing higher.
Overall the S&P chart is bullish but as explained above there are more bearish signals that are warning investors to stay cautious.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive but unchanged.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday April 30 2021. On Tuesday the signal lower was 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 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 a down 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 falling.
- 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:
4225 is resistance
4200 is resistance
4150 is light support
4100 is light support
4070 is very light support
4050 is light support
4000 is Support
3900 is support and the 50 day is just above this at 3933.
3850 is support
3800 is support and the 100 day is just above this level.
3750 is good support
3700 is light support
3680 is light support
3600 is strong support and the 200 day is just above this level.
Stock Market Outlook for Tomorrow – Wed May 5 2021
The technical indicators are primarily signaling lower for the index but the potential for a bounce in the early morning is high for the index. The bounce though won’t hold and the market is set to move still lower before it stabilizes.