Tuesday saw investors skittish ahead of the Fed Announcement on interest rates due out on Wednesday. Trading volumes were still below average on Tuesday with many investors sitting on the sidelines waiting for the interest rate decision.
The S&P lost 44 points to close at 3855 while the NASDAQ lost 109 points to close at 11,425.
Much of Wednesday morning will be influenced by investors nervousness while waiting for the next interest rate increase. However the technical indicators will play a role, especially later in the day and into Thursday.
Let’s review the closing technical indicators from Tuesday’s close to see what to expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Sep 20 2022
Very little change was seen on Tuesday in the SPX chart. The closing candlestick is bearish but again, points to a potential bounce as it shows a long shadow (tail) by the close, often a signal for a coming bounce attempt.
The 21 day moving average continued its descent but of some interest is the Bollinger bands which are continuing to show signs of a potential Bollinger Bands Squeeze probably happening after the Fed’s interest rate announcement. The direction is not known but as of Tuesday’s close it would appear stocks could move lower after the announcement.
All the moving averages are turning lower which is bearish.
There are now 4 down signals in place since April and no up signals.
The chart is 90% bearish for Wednesday.
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 a down signal on Monday Aug 22. On Tuesday the down signal gained strength. The histogram also gained strength. Both signals though remain very bearish.
- 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 and is rising above 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 back toward being 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 at its lowest reading since the June sell-off and trending sideways.
- 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:
4250 is stronger resistance
4220 is light resistance
4200 is strong resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is light resistance
3975 is light resistance and is a decline of 17.5%
3950 is light support
3925 is light support
3900 is strong support
3875 is light support
3850 is good support
3825 is light support
3810 is good support
3800 is light support
Stock Market Outlook for Tomorrow – Wed Sep 21 2022
For Wednesday the technical indicators are primarily unchanged and showing a chance for a bounce but nothing sustainable at the present time. Most of the day will be all about the Fed’s decision on interest rates which are expected to be three-quarters of a percent higher. If the decision is for a full percent increase, stocks will tumble. Anything less than 0.75% and stocks should rally strongly.
Potential Market Moving Events
The biggest market moving event for the week is today with Fed Chair Powell announcing another rate hike. Often his news conference causes swings in the markets.
Tuesday:
8:30 Building Permits were lower at 1.52 million
8:30 Housing starts were much higher than expected at 1.58 million versus 1.50 million expected and 1.40 million prior.
Wednesday:
2:00 Fed Reserve statement on interest rates
2:30 Fed Chair Powell news conference
Stock Market Outlook Archives