Tuesday’s outlook was for the selling to continue and indeed volume rose as the indexes all collapsed. The Dow at one point was down 600 points and ended the day down 2.2% for a 551 point loss.
The S&P plunged 1.82% for a 48 point loss and another close below 2700.
The NASDAQ managed to not fall as deep as it had on Monday. Still, the decline was 1.7% for a drop of 119 points and a close below 7000. The index has now lost 1225 points from its all-time high set back in August.
Stock Market Outlook Chart Comments At The Close on Tue Nov 20 2018
The S&P index closed below the 200 day and 21 day moving averages again on Tuesday. It broke below the Lower Bollinger Band. This resulted in the Lower Bollinger Band turning down which often precedes another move lower.
The Upper Bollinger Band is now moving sideways and not falling. To some extent this is a bit of a bullish sign but the chance it will last is slim.
The 50 day moving average is still falling but has not yet crossed below the 100 day.
The SPX continues to struggle against 3 major sell signals and the break of the 2700 level on Tuesday and close below it are bearish.
The S&P chart is bearish.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and falling
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Mon Nov 5 2018. The up signal was lost on Tuesday and changed to an unconfirmed down signal.
- 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.
- 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 for Wednesday.
- 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 now 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 indicating lower prices lie ahead.
- 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:
2900 was good support – this will be strong resistance
2860 was good support – this will be resistance
2830 was light support and will be light resistance
2795 is light resistance
2745 to 2750 are light resistance
2725 is light resistance.
2700 will be resistance if the index closes lower again on Wedneday.
2675 is light support which was broken on Tuesday
2650 is light support which was broken on Tuesday
2620 is light support
2600 is strong support and held the market up from the lowest pullback in the present correction
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 of 641 points as a drop to this level would be 21% and just 5% away from a bear market signal ending the bull market from 2009.
Stock Market Outlook for Tomorrow – Wed Nov 21 2018
There are no bullish signals for Wednesday other than the market being oversold. If the correction remains typical, then Wednesday should see a drop to 2600 and then a potential bounce which will fail. It would then be followed by another bounce attempt by Monday.
However Wednesday is the final day before the long Thanksgiving weekend. That often means low volume so we could see a potential bounce occur on Wednesday and then more selling. A negative day is expected and there is still the possibility of a test of 2600.
Bearish sentiment is extremely high among analysts and investors. Often that can translate into a potential bottom beginning to form. There are though, few signs of a bottom yet being worked at.
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