Stock Market Outlook for Thu Dec 10 2020 – Weakness, Sideways With Bias Lower

Wednesday saw stocks dip lower with all 3 indexes pulling back. The S&P dipped 29 points to close at 3672 for a loss of 0.79%.

Stock Market Outlook Chart Comments At The Close on Wed Dec 9 2020 

Wednesday saw the index close back below 3700. The closing candlestick is bearish for Thursday.

Meanwhile the index has entered a Bollinger Bands Squeeze. It’s a bit early to predict which direction the index will move out of the squeeze.

The 21 day, 50 day, 100 day and 200 day moving averages are all rising, a bullish sign. The 21 day is rising rapidly as well and moved higher above 3600 on Tuesday. Often the speed of the climb for the 21 day indicates a dip should be expected shortly as the index is overbought. The up signal from Oct 21 is still in play, and the chart remains bullish despite the closing candlestick, concerns over the rise of the 21 day and the Bollinger Bands Squeeze.

Stock Market Outlook review of Wed Dec 9 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is falling 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 on Nov 5. The up signal was almost gone on Wednesday. We could get a down signal as early as Thursday.

• 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.

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.

• 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 for a sixth straight day.

• 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 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 10 2020 

Remember on Monday the candlestick was a Doji which often signals a change for a day or two. On Wednesday we saw weakness and for Thursday the technical indicators are pointing to another day of weakness.

We could see a down signal from MACD on Thursday which would be disappointing for the bulls and may signal a few days of weakness ahead. However the past several days have whittled away at the overbought condition and note how the technical indicators no longer show overbought signals. As well any action on the stimulus front though will see the market jump.

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