Stock Market Outlook for Wed Sep 2 2020 – Overbought, Dips Likely But Higher

Tuesday’s technical indicators pointed to the market taking a breather but that was not the case. The morning saw a dip below 3500 near the open, which immediately found buyers. Every dip, no matter how small continues to find buyers. The rest of the morning the index spent clinging to 3510 and then into the mid afternoon the index climbed first to 3515 and then in the final hour it jumped to close at 3526. Meanwhile the NASDAQ is nearing the 12,000 level as buyers continue to snap up tech stocks. By the close of the day, the technical indicators from yesterday had reversed direction as you can read below.

Stock Market Outlook Chart Comments At The Close on Tue Sep 1 2020 

On Tuesday the closing candlestick is bullish following a third close higher above 3500. The 50 day is continuing to try to climb above the Lower Bollinger Band which would keep the rally alive.

There are still 6 up signals and two down signal caused when the Lower Bollinger Band moving above the 100 day moving average back on July 27 and on Aug 31 above the 50 day. Today the 50 day has moved back to the Lower Bollinger Band.

The 21, 50, 100 and 200 day moving averages are continuing to climb. The SPX chart is still very bullish.

Stock Market Outlook review of Tue Sep 1 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an signal on Monday Aug 24. That signal was stronger 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 is rising..

• 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 and is still 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 is rising and extremely overbought.

• 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 unchanged indicating that prices won’t change much on Wednesday.

• 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:

3500 is resistance

3450 is resistance

3400 is support

3375 is support

3300 is support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is support

2975 is light support

2950 is light support

2900 is light support

 Stock Market Outlook for Tomorrow – Wed Sep 2 2020 

For Wednesday the technical indicators have switched and are back supporting another bullish day on September 2.

The rate of change yesterday indicated prices would change which they did, to the upside. For Wednesday the Rate Of Change shows that we shouldn’t expect too much change in prices.

Dips are continuing to find buyers but there are signals advising caution as not only is the market extremely overbought but the rally is narrowing again as more investors are piling into fewer stocks as they are rushing to chase those stocks that are racing higher.

Wednesday will see a higher close but dips should be expected. However those dips will still find ready buyers.

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