Stock Market Outlook for Mar 30 2020 – Lower Despite New Up Signal

Friday saw markets remain volatile. The S&P traded between 2520 and 2615. A late afternoon rally was met with sellers which pushed the index back from almost positive to close down 88.6 points in a wild final hour of trading that left the index at 2541.47.

Stock Market Outlook Chart Comments At The Close on Fri  Mar 27 2020 

The SPX chart continues to be bearish and presents what looks like a classic bear market rally from last week.

There are now 4 sell signals on the market which are in the chart below in pink.

All the moving averages are plunging but the 21 day is in a relentless tumble lower.

Overall the chart is ugly for equities. One indicator to watch is the Lower Bollinger Band which is trying to turn sideways. It may be trying to bottom although on Friday it turned lower again due to the selling.

Friday’s closing candlestick is bearish for Monday although it does indicate we could see an attempt to bounce during the day but it would fail. The index looks set to fall back below 2500 on Monday.

Stock Market Outlook review of Fri Mar 27 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is back falling.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Thursday March 26. The up signal was confirmed on Friday despite the late day plunge.

• 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 signal was also rising but has turned sideways for Monday indicating weakness to start off the week.

• 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 not oversold.

• 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 to the resistance line established over the past month.

• 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 also rising but turned more sideways on Friday. It has stayed above its most recent resistance line.

• 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:

2700 is strong resistance and was a drop of 20.4%.

2675 is light resistant

2650 is resistance

2625 is light resistance

2600 is resistance

2550 is light resistance

2500 was good support and marked a correction of 26.3%

2344 is the next level of support and marks a 30.9% correction.

2100 is light support

2000 is good support and marks a drop of 1393 points for a 41% correction. More analysts are jumping onto this level as where the correction is heading.

 Stock Market Outlook for Tomorrow – Mon Mar 30 2020 

For Monday the outlook is negative despite a confirmed up signal from MACD.

There are far more down signals than up in the technical indicators to believe the rally can continue from last week.

Overall the rally still has all the makings of a bear market rally. Monday will show more weakness and a lower close although a failed rally attempt might take place in the morning.

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