Stock Market Outlook for Mon Nov 2 2020 – Deeply Oversold One Day Ahead Of Elections

Friday saw the market tumble to a new correction low but once again investors staged a late day comeback to close the index at 3270 for a loss of 40 points. Let’s review Friday’s close and see what the technical indicators are predicting for the start of the first week of November.

Stock Market Outlook Chart Comments At The Close on Fri Oct 30 2020

Friday’s chart continues to show weakness. The closing candlestick was unable to move above the 100 day moving average and closed below it. This is bearish for the start of the week.

As well the Upper Bollinger Band is still rising buy the Lower Bollinger Band is turning lower. The 21 and 50 day moving average are falling while the 100 and 200 day moving averages are still climbing. In general this is bearish.

The up signal from Oct 21 is still in play, but if the 21 day falls below the 50 day this week, it will negate that signal and start a new down signal.

In general the chart remains bearish for the S&P.

Stock Market Outlook review Fri Oct 30 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling, negative and oversold.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Oct 25. On Friday the down signal was stronger. It is also showing oversold.

• 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 turning sideways and oversold.

• 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 neutral signal in place and is extremely 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 and signaling oversold.

• 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 indicates on Monday we shouldn’t expect much change.

• 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 resistance

3300 is resistance

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 – Mon Nov 2 2020 

With the elections one day away, the index may stay under some selling pressure but in general historically markets stay more sideways than up or down ahead of the voting.

The technical indicators are almost all very oversold which increases the chance of a bounce. Overall I am not expecting much to either the upside or downside on Monday.

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