Stock Market Outlook for Wed Dec 23 2020 – Weakness and Lower

On Tuesday stock indexes split with the S&P moving slightly lower and the NASDAQ closing at a new all-time high.

The S&P fell 7 points to close at 3687.

Stock Market Outlook Chart Comments At The Close on Tue Dec 22 2020 

Tuesday saw another close slightly below the 3700 level. The closing candlestick on Tuesday was bearish for a second straight day.

If you look at the chart you can see that the Upper Bollinger Band is turning lower and the Lower Bollinger Band is spiking higher. A tighter Bollinger Bands Squeeze is in play now and we could see a dip lower and there is the potential for a close below the 21 day moving average. News this evening of President Trump’s displeasure with the Covid-19 stimulus bill and his request for Congress to increase the payouts to people impacted by Covid-19 from $600 to $2000 or $4000 for couples, and changes for businesses could mean no stimulus before Christmas or the end of December. Wednesday could see a dip as investors worry that there may be no stimulus measures before year end.

All the major moving averages are still rising which continues to suggest that new highs lie ahead for the S&P. Today though, the index touched the 21 day moving average for a second straight day. Normally this signals a close coming below the 21 day.

Stock Market Outlook review of Tue Dec 22 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling and is negative.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a a down signal on Dec 10. The down 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 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 down signal in place. It is no longer 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 falling for a second straight day.

• 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 which means prices should change shortly. That could mean higher prices or lower prices, but it is definitely signaling that prices are going to make a move 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:

3700 is resistance

3600 is light support

3550 is support

3500 is support

3450 is support

3400 is support

3375 is support

3300 is support

3275 is support

3200 is support

3150 is support

3050 is support

3000 is support

 Stock Market Outlook for Tomorrow – Wed Dec 23 2020 

The biggest concern this evening after the close is the Bollinger Bands Squeeze which looks ready to signal a larger dip coming in the index.

For Wednesday watch for a move below the 21 day moving average and a c lose below it.

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