The bounce attempt on Wednesday didn’t quite work. It did however, seem to slow the selling and turn the S&P sideways. By the close the index was down just 4 points, which when coupled with Monday’s loss of 1 point means the index has lost only 5 points so far this week.
Tuesday showed us that there are buyers still in the market. On Wednesday we need to see if they can be back buying again. The S&P is not down very much from its all time high. That could actually work against the index as many investors are looking for better prices to risk their capital at, which means they may want lower prices still. If they pullback from buying at the present 2880 level, then the index will fall until it finds more buyers. Wednesday should give us a better idea which way the index is planning on heading next.
Stock Market Outlook Chart Comments At The Close on Tue Oct 9 2018
The S&P spent Tuesday trying to hold onto the 50 day moving average. By the end of the day the index closed once more on the 50 day.
This left behind a bearish candlestick for Wednesday.
The Lower Bollinger Band is still rising while the Upper Bollinger Band is falling which could signal a resumption of the Bollinger Bands Squeeze.
The 21 day and 50 day moving averages are starting to turn sideways but the 100 and 200 day moving averages are still climbing.
At present the chart is more bearish than prior trading days.
Stock Market Outlook review of Tue Oct 9 2018
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is negative and moving sideways.
- 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 Sep 26. The down signal was very strong 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 negative and trending sideways.
- 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 still now has a strong 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 lower and falling further into 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 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 Levels To Be Aware Of:
2900 was good support.
2860 is good support
2830 is light support
2795 is light support
2745 to 2750 is 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 Oct 10 2018
There are no technical indicators pointing to the market rising on Wednesday except for the Relative Strength Index (RSI). It is at readings that often result in a bounce back.
As well, the Dow has been down 4 days in a row and often that assists in moving stocks higher.
Despite this, the technical indicators all point to a lower day on Wednesday. Therefore on Wednesday we should see another choppy day and another bounce attempt.
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