The first day back from the long weekend found investors ready to continue the sell-off. Throughout the day on Tuesday, investors used every spike to sell stocks in a wide ranging sell-off for the third straight day. The S&P is now down 7.1% from its all-time high of 3588. The NASDAQ is down 10% from its all-time high of 12,074. On Tuesday selling was relentless and the SPX index closed just above the 50 day moving average. The outlook continues to look weak for stocks as you can see tonight in the technical analysis.
Stock Market Outlook Chart Comments At The Close on Tue Sep 8 2020
On Tuesday the closing candlestick is bearish and once again signals the potential for a bounce attempt as stocks are becoming very oversold.
The Upper Bollinger Band and Lower Bollinger Band are turning down a signal that there is more downside ahead for stocks. The 21 day moving average is also starting to turn down. The index today brushed the 50 day moving average and closed just above it. Normally this signals a bounce attempt could occur anytime, but a move below the 50 day is likely.
There are still 6 up signals and two down signal caused when the Lower Bollinger Band movied above the 100 day moving average back on July 27 and on Aug 31 above the 50 day.
The 50, 100 and 200 day moving averages are continuing to climb. The SPX chart is becoming more bearish as the Bollinger Bands and the 21 day moving average are turning down.
Stock Market Outlook review of Tue Sep 8 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling again on Tuesday.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Friday Sep 4. That sell signal was strongly confirmed with a reading of negative 13.
- 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 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 strong down signal in place.
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 and beginning to reach oversold readings..
- 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 still falling indicating prices could continue to fall.
- 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:
3600 is resistance
3500 is resistance
3450 is resistance
3400 is resistance
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 9 2020
For Wednesday there is still a good chance the index will try to bounce but investors are worried enough that any bounce won’t last. It will be met with selling as investors want to get out of positions while there are still decent profits.
The S&P could easily fall another 3% between Wednesday and Thursday before the selling may slow. Another 3% would mark a 10% correction from the all-time high which should slow sellers.
For Wednesday investors could see a bounce but it will be highly suspect as the outlook is still lower for the indexes before the current selling dries up.
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