Stock Market Outlook for Fri Mar 25 2022 – Overbought With Some Weakness But Bias Up

On Thursday stocks recovered the losses from Wednesday which seemed to confound many analysts who continue to warn that the rally is a bear market trap. On Wednesday they pointed to the losses as the rally signaling it was running out of steam. On Thursday they saw the early dips as a sign supporting their outlook. Instead by the end of the day stocks were 2 to 1 in favor of advancers and all three indexes recovered the losses from Wednesday.

The S&P rose 63 points to close at 4520. The NASDAQ rose almost 2% to add 269 points and close at 14,191.

Let’s review Thursday’s closing technical indicators to see what they advise investors should expect for Friday.

Stock Market Outlook Chart Comments At The Close on Thu Mar 24 2022 

The index rose to close above the 100 day moving average and at the Upper Bollinger Band.

The Upper Bollinger Band is still moving higher and the Lower Bollinger Band is turning sideways, indicating further upside is expected.

The closing candlestick on Thursday is bullish for Friday but also signals the stocks are still overbought.

The 21 day moving average is moving higher which is bullish. The 200 day moving average is also starting to turn higher.

The SPX still has 4 down signals in place.  The 50 and 100 day moving averages are still falling lower.

The chart is more bullish again on Thursday and indicates the index is still overbought but has room to move higher on Friday.

Stock Market Outlook review of Thu Mar 24 2022

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and positive.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal Wed Mar 16 2022. On Thursday the MACD signal saw another sharp increase in strength. The MACD histogram also has a stronger reading.

• 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 moving sideways and overbought.

• 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 weak down signal in place and is 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 signaling 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 rising strongly.

• 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:

4575 is resistance

4560 is resistance

4550 is resistance

4525 is resistance

4500 is resistance

4490 is light resistance

4475 is light support

4450 is light support

4400 is support

4370 is light support

4350 is light support.

4300 is good support

 Stock Market Outlook for Tomorrow – Fri Mar 25 2022 

The strength on Thursday in stocks, which are still in an overbought markets is a signal that stocks have further to climb.

Friday will see some dips again and possibly back to 4500, but with the SPX above the 4500 valuation on Thursday at the close are pointing to Friday ending still higher.

On Friday then, watch for weakness in this very overbought market, possibly down to 4500 again but a higher close is expected.

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