All new highs again on Tuesday in the NASDAQ and Dow Jones Indexes and with the S&P closing near yesterday’s high, the indexes are still overbought.
The MSCI index jumped to its baset reading in just under 2 years which seemed to catch many economists and analysts by surprise. Oil is back climbing pushing up energy stocks while the dollar is gaining strength as well.
Stock Market Outlook Chart Comments At The Close on Tue Nov 5 2019
The SPX chart is bullish and closed above 3000 again on Tuesday and near all-time highs. The Upper Bollinger Band is rising and the Lower Bollinger Band is also rising. This is bullish for the first week of November.
The closing candlestick on Tuesday is bearish for Wednesday but more an indication of an overbought market, than a market that will pullback.
A new support level is developing at the 3030 level which is from last week. Any dip back may try to test that level on Wednesday or Thursday. It would not be a concern to see that happen.
All the major moving averages are climbing including the 50 and 21 day moving averages. The 21 day moving average is now above the levels from late September which is bullish.
The two buy signals from September are still in place.
The Lower Bollinger Band is now above the 200 day moving average and climbing. This is also bullish.
Stock Market Outlook review of Nov 5 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and moving sideways.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Tue Oct 15 2019. The up signal was strong again on Tuesday.
- 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 positive and moving sideways, signaling that the index is overbought.
- 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 is extremely overbought with a neutral signal 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 overbought.
- 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 moving sideways with unchanged readings. Often this means no significant changes in prices should be expected.
- 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:
3100 is resistance
3030 in light support
3000 is support
2960 is light support
2950 was light support
2900 is light support
2860 is light support
2840 is support
2800 is strong support
2795 is light support
2745 to 2750 is light support
2725 is light support
2700 is light support
Stock Market Outlook for Tomorrow – Wed Nov 6 2019
The 200 day moving average is below the Lower Bollinger Band as it climbs higher. This is bullish longer term for the index.
The signals are all pointing to a very overbought market which is understandable. However investors may not be ready to take large profits. Instead they may take smaller profits and keep the index sitting sideways for a few more days.
The outlook is higher for the indexes, moving forward but on Wednesday it looks like we will see weakness develop and there will be dips. Any dips are opportunities to setup more trades in my opinion and that is what I will be doing on Wednesday.
Even if the index closes lower on Wednesday it will still be an opportunity to setup more trades as the overall bias continues to be up.
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