On Wednesday the index had a tight trading day with a high of 3711 and a low of 3689. Low volume and the lack of passage of the Covid-19 stimulus bill was enough to see the index close at the lows of the day. The index ended up just 3 points to 3690.
Stock Market Outlook Chart Comments At The Close on Wed Dec 23 2020
Wednesday saw another close just below the 3700 level. The closing candlestick on Wednesday was neutral to bearish for the half day on Thursday.
The Bollinger Bands Squeeze is continuing to tighten and with the anticipated Santa Claus Rally for next week, the Squeeze looks more likely to disappoint investors by pushing the index lower.
One strong point though is the index has not closed below the 21 day moving average since late October to early November. Despite the weakness seen over the past 4 trading days, the index is showing surprising strength with every dip finding ready buyers.
All the major moving averages are still rising which continues to suggest that new highs lie ahead for the S&P. A close below the 21 day moving average would be bearish, if it was done on high volume. At present the chart is still more bullish than bearish.
Stock Market Outlook review of Wed Dec 23 2020
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and back positive.
- 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 Wednesday.
- 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 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 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 third 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 falling which usually means prices will not change much on Thursday.
- 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 – Thu Dec 24 2020
For Thursday the half day on Christmas Eve normally experiences low trading volumes and tends to have a bias sideways to up.
For Thu Dec 24 2020 the bias is also neutral but slightly bearish rather than bullish. Any positive news on the stimulus package will assist in getting the index to close positive. Otherwise the technical indicators are advising investors should expect a sideways to slightly lower close for the half day on Thursday.
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