Tuesday saw a stronger rally with the SPX gaining 112 points to close at 3790. The NASDAQ gained 360 points closing back above 11,000 at 11,176. Volumes rose heavily on Tuesday with 5.3 billion shares traded on the SPX, 95% of which was to the upside. 5.1 billion shares were traded on the NASDAQ with 91% trading higher.
Technical indicators also changed on Tuesday including the down signal from MACD which lost most of its strength.
Let’s review Tuesday’s technical indicators to see what to expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Oct 4 2022
At the close of trading the S&P closing candlestick is bullish and points to the bounce continuing. The closing candlestick is further inside the Lower Bollinger Band and just below the 21 day moving average. The two-day jump has stocks a bit ahead of themselves and the closing candlestick advises a dip or more than a single dip should be expected for Wednesday, but a higher close is still expected.
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 is dipping back but still has not fallen below the 200 day moving average. This is bullish and suggests the index should move higher on Wednesday. The Lower Bollinger Band is turning sideways. This is neutral.
All the moving averages are still falling which is bearish.
There are now 5 down signals in place since April and no up signals.
The chart is 75% bearish for Wednesday with the Upper Bollinger Band, Lower Bollinger Band and closing candlestick indicating the index will move higher on Wednesday.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Tuesday the down signal lost most of its strength. The histogram also lost strength. Another up day on Wednesday and MACD will issue an up 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 is rising and positive.
- 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 an up signal in place. Signals are still showing oversold.
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 rising sharply and back positive.
- 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 rising.
- 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:
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is llight resistance
3925 is llight resistance
3900 is good resistance
3875 is light resistance
3850 is light resistance
3825 is light resistance
3810 is light resistance
3800 is resistance
3775 is light resistance
3750 is light resistance
3730 is light resistance
3700 is good support
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 5 2022
For Wednesday the index will see some dips, perhaps more than one but the technical indicators are pointing to a higher close. Investors shouldn’t expect a third day of large gains but a moderately higher close will keep the rally intact.
Potential Market Moving Events
The biggest market moving event for the week is Friday’s September non-farm payrolls.
Wednesday:
8:15 ADP employment report
8:30 international trade balance
Stock Market Outlook Archives