Stock Market Outlook for Thu Dec 21 2023 – Bounce Attempt Likely After Plunge

Prior Trading Day Summary:

On Wednesday stocks were continuing higher when late in the afternoon selling erupted. Stocks plunged and ended the day lower. It was obvious to every investor that the stock market has been overbought and was on the verge of a pullback. The extent of the selling though was a surprise as once selling erupted and the index fell, sell orders were hit which sent stocks lower. By the end of the day it had been the worst single plunge since September 21 when the SPX lost 72 points.

Volumes rrose on the NASDAQ to 6.5 billion shares traded but on the SPX average volume rose just 100 million shares traded.

Let’s review the closing technical indicators from Wed Dec 20 2023 to see whether the selling will continuing on Thu Dec 21 2023.

Stock Market Outlook: SPX Closing Chart For Wed Dec 20 2023

The index closed above all major moving averages but below the Upper Bollinger Band. This is neutral to bearish.

The 21 day moving average is rising further, which is also bullish. It reached SPX 4600 on Monday and is still advancing.

The closing candlestick is bearish for Thursday and is signaling the index is still  overbought even with Wednesday’s dramatic sell-off.

The 50 day moving average is above the 100 day.

The 100 and 200 day moving averages are climbing which is bullish.

The Lower Bollinger Band is turning lower and the Upper Bollinger Band is turning higher, signaling the Bollinger Bands Squeeze is ending.

The S&P chart is still more bullish than bearish despite the plunge on Wednesday.

Stock Market Outlook review of Wed Dec 20 2023

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Thu Dec 21 2023 

The dramatic late afternoon collapse of equities on Wednesday was not unexpected. The indexes have all been overbought for days and a pullback was expected. As the selling unfolded the index hit sell signals from various investors and fund managers which made the selling worse. As stop-losses continued to be hit as the index fell, volumes rose, particularly on the NASDAQ which saw an above average day of volume, reaching 6.5 billion shares. Even more dramatic was how the selling overtook the early day’s results. On the SPX in the final hour of trading, the amount of selling reached 90%.

Some technical damage was done on Wednesday during the steep sell-off and it will take one or two days to determine whether the sell-off signals an end to the rally or just a lull in in the rally.

For Thursday investors should expect some kind of a bounce attempt, especially in the morning but the chance of Wednesday’s sell-off being a one day event is slim. Normally we will see further selling on Thursday and a lower close.

Potential Economic and Political Market Moving Events

Major economic events this week are Housing starts on Tuesday, GDP (revised) on Thursday and durable goods orders on Friday. This week is light on economic data which often assists the bulls in pushing stocks higher.

Monday:

Home builder confidence is expected to come in higher at 36 from last month’s 34 but came in at 37

Tuesday:

8:30 Housing starts are expected to be 1.36 million but came in much higher at 1.56 million.

8:30 Building permits are expect to be 1.48 million but came in at 1.46 billion.

Wednesday:

8:30 Current Amount for third quarter is expected to rise to -197.5 billion.

10:00 Existing home sales is expected to dip to 3.6 million but rose to 3.76 million

10:00 Consumer confidence is estimated to rise to 104.5

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims are estimated to come in at 215,000.

8:30 GDP revised is expected at 5.1%

8:30 Philadelphia Fed Manufacturing is expected at -4.0

10:00 Leading economic indicators are expected to come in at -0.5%