Stocks opened well on Tuesday Oct 22 with the S&P pushing to within 14 points of the all-time index high, but the NASDAQ struggled from the “get go” and perhaps that should have been the signal to watch. By the mid-afternoon the rally was already over as investors were more focused on those handful of stocks that had missed earnings estimates, like McDonalds (MCD) and Travelers (TRV) than those who had beaten estimates. Stocks began to turn lower and by the end of the day, the 3000 level was lost again and the indexes all closed at their lowest levels of the day.
Stock Market Outlook Chart Comments At The Close on Tue Oct 22 2019
The SPX chart is still bullish but closed back below 3000 and left behind a bearish candlestick for Wednesday.
All the major moving averages are still climbing but the 21 day moving average is starting to stumble and slipped a bit on Tuesday. We need to watch it in case it falls below the 50 day which would be a sell signal. You can see in the chart below that the 21 day moving average has not recovered the level it was trading at in mid to late September. This is bearish.
The Bollinger Bands are still moving parallel indicating no real change in direction is expected as the index remains stuck sideways.
The two buy signals from September are still in place.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising for second day.
- 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 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 but 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 neutral signal in place and is overbought 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 although a sideways move appears more likely.
- 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 indicating no meaningful change in prices is 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:
3000 is resistance
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
2675 is light support
2650 is support
2625 is light support
2600 is support.
Stock Market Outlook for Tomorrow – Wed Oct 23 2019
For Wednesday stocks may try to bounce at the open but the technical indicators are back pointing to weakness yet again as the S&P continues to struggle to break through 3000.
After the close on Tuesday, Snap, Texas Instruments, AMD, Intel, NVIDIA, iRobot, Six Flags, Whirlpool and Skechers dropped with a number of these falling more than double digits. This will mean more weakness on Wednesday.
The S&P is within a handful of points of making a new high but just cannot find enough volume and buyers to break through and hold above 3000. Wednesday will be a day when the bias has shifted back to weakness and a lower close.