Tuesday was another sideways day with the S&P stuck in a very tight trading range between 2995 to 3000 for most of the day. The late afternoon saw the index rise to close on the highs of the day at 3006 as investors anticipate a rally if the Fed cuts interest rates on Wednesday. This is a typical move in the final hour of trading the day before a major Fed announcement.
There are not a lot of changes tonight and while it is indeed all about the Fed decision on interest rates on Wednesday, it is worth a review of the technical indicators on the eve of the next major Fed announcement.
Stock Market Outlook Chart Comments At The Close on Tue Sep 17 2019
The 21 day moving average is continuing to climb and should reach the 50 day this week and move above it. That will be a major up signal when it occurs. It will also negate the sell signal from Aug 16 which is still in effect.
The closing candlestick on Tuesday is bullish for Wednesday.
The 50 day moving average is moving sideways. The 100 and 200 are climbing, signaling further upside is ahead.
The S&P chart is more bullish again, heading into Wednesday.
Stock Market Outlook review of Tue Sep 17 2019
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is positive and rising.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Thurs Aug 29. The up signal was weaker again by the close on Tuesday but at 8.7 it is still strong enough to continue the rally.
- 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 moving sideways for a second day.
- 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 has a down signal in place and is very overbought.
- 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 has stopped falling and is moving sideways.
- 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 back falling which means prices may decline shortly.
- 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 good support
2950 is 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 Sep 18 2019
After two days of mixed and sideways action with a bias to weakness, the technical indicators are becoming more mixed. They are all still holding a bias to the upside, even the Rate Of Change which is pointing to some lower prices ahead. However a lot depends on the Fed’s decision on Wednesday. If there is the highly anticipated interest rate cut, stocks should rally immediately, but they could also bounce and then sell lower in a “sell the news” type scenario.
Overall the interest rate decision on Wednesday, is one of the most highly anticipated events by the Fed this year and a lot will also depend on the wording by the Fed after the announcement, as to the outlook for yet another rate cut this year.
On the other side of the scenario we could see the Fed not cut rates which is not expected but should it happen will result in a drop in the index.
The technical indicators on their own are not looking poorly at this point and a push higher probably would have happened on Wednesday without any Fed announcement. That means the technical indicators are showing enough strength that if the Fed cuts the rate on Wednesday and market dips after, it will be an opportunity to setup further trades and not the start of a down move.
The worst case scenario for stocks would be no rate cut at all. So Wednesday then is definitely, all about the Fed.
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