On Tuesday, stocks struggled to hold the 3600 level but broke several times. By the end of the day, with more worries coming out of the UK and their bond market, investors couldn’t hold the index up and it closed below 3600 at 3588. The NASDAQ closed down 115 points and semiconductor stocks continued to be hammered with many now trading at levels last seen in July 2020. Others are still deeper like Intel Stock which is back at levels last seen in June 2014. With the dividend continuing to be paid out, many investors are beginning to wonder if the dividend could be cut soon.
Volumes were much higher on Tuesday with the SPX at 4.8 billion shares traded and only 14 new highs but 580 new lows. The NASDAQ also traded 4.8 billion shares with 40 new highs and 836 new lows. These are strongly bearish numbers but they are also reaching the point where, once again, investors might see a bounce against an ever increasing oversold condition.
Let’s review Tuesday’s closing technical indicators to see whether a bounce could happen on Wednesday. Any kind of bounce on Wednesday is a tough call as investors in the afternoon get the latest FOMC minutes and often lately, those minutes have sent stocks lower.
Stock Market Outlook Chart Comments At The Close on Tue Oct 11 2022
At the close of trading the S&P closing candlestick is bearish for Tuesday but it also is signaling the potential exists for a bounce attempt. The closing candlestick is well below the 21 day moving average and falling toward the Lower Bollinger Band. It signals the market is oversold.
The 21 day moving average continued its descent and the 100 day continued moving lower below the 50 day. Both are bearish signals.
The Upper Bollinger Band continued falling below the 200 day moving average signaling stocks will move lower. The Lower Bollinger Band is trying to turn up. This is still bearish but it could also be a signal that a Bollinger Bands Squeeze is starting to take shape.
All the moving averages are still falling which is bearish.
There are now 6 down signals in place since April and no up signals.
The chart is 98% bearish for Wednesday. On the closing candlestick on Tuesday is signaling a small possibility of a bounce attempt.
Stock Market Outlook review of Tue Oct 11 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wednesday Oct 5 2022 . On Tuesday an unconfirmed down signal was generated. The histogram was also negative..
- 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 falling and negative.
- 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. It is entering the start of oversold readings.
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 negative. It is also entering 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 and negative. It is back at levels last seen Sep 26 before the index made a new low and then attempted a bounce.
- 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:
3800 is resistance
3775 is light resistance
3750 is light resistance
3730 is light resistance
3700 is light resistance
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
3585 is light support
3550 is good support
3530 is light support
3515 is light support
3500 is good support and is a decline of 27%
Stock Market Outlook for Tomorrow – Wed Oct 12 2022
The technical indicators are strongly bearish for Wednesday and the MACD indicator issued an unconfirmed down signal at the close of trading on Tuesday. The closing candlestick and a couple of technical indicators are signaling that the market is again oversold but there is still room to the downside which means any bounce on Wednesday should be treated as highly suspect.
In the afternoon at 2:00 PM the FOMC minutes are released. Their release is often followed by high volatility and Wednesday may prove no different. Stocks are once again looking extremely attractive but the question is whether investors are willing to step in and snap up stocks, especially when the past couple of bounces have caught investors holding shares as markets turned around and plunged deeper. A close below 3600 is again likely on Wednesday.
Potential Market Moving Events
Today investors get the FOMC latest minutes at 2:00 PM. That will move markets. I am holding a SPY ETF trade ahead of the minutes being released. This trade was setup on Tuesday. Thursday we get a large number of CPI reports which may also move markets lower if they show no let up in inflation which is becoming the expectation. Therefore any sign of a slowing of inflation should send stocks higher.
Tuesday:
6:00 NFIB small-business index came in higher than expected at 2.2%
11:00 NY Fed 5 year inflation expectations rose slightly to 2.2%
Wednesday:
8:30 Producer Price Index
2:00 FOMC minutes released
Thursday:
8:30 Consumer Price Index
8:30 Core CPI
8:30 Core CPI 3 month
8:30 CPI year-on-year
8:30 Core CPI year on year
8:30 Weekly Initial Unemployment Insurance Claims
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