Monday saw investors trying to pick through the rubble left from Friday’s market massive sell-off. Intraday in the morning the index fell to below 4020 and then managed to rally back to above 4060 in the mid-afternoon. The close found sellers returning and the index closed down 27 points to end the day at 4030. The NASDAQ fell 124 points for a full percent loss. It closed at 12,017. Intraday the index slipped below 12,000 but found some buyers willing to risk capital which helped the index close above 12,000 again.
As investors try to grapple with the resoluteness of the Fed in raising rates probably at least through to year-end, Tuesday may try to setup a bounce again.
Let’s review the closing technical indicators from Monday to see what they advise investors should prepare for on Tue Aug 30 2022.
Stock Market Outlook Chart Comments At The Close on Mon Aug 29 2022
The closing candlestick is pointing to a good prospect of a further bounce attempt on Tuesday. At the same time is remains bearish and is signaling the index will move lower.
The candlestick is below the 200 day moving average, 21 day and the 100 day moving average. It closed just above the 50 day which is bearish but often investors can expect a bounce attempt off a major moving average, like the 50 day.
The Upper Bollinger Band and Lower Bollinger Band are into a Bollinger Bands Squeeze. This is bearish and signals a move lower to start the week.
The 21 day moving average is just below the 200 day but is starting to turn down. This is bearish. It may not cross above the 200 day.
The 21 day moving average moved above the 100 day moving average on Wed Aug 16 for a second major up signal.
The first up signal since April was released Tuesday Aug 2 when the 21 day moving average crossed above the 50 day moving average.
The 200 and 100 day moving averages are now trending sideways which is neutral.
The 50 day has been rising and continued its push higher on Monday despite Friday’s sell-off.
There are now 2 down signals still in place and two up signals.
The chart is 85% bearish for Tuesday.
Stock Market Outlook review of Mon Aug 29 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Monday Aug 22. On Monday the down signal gained strength. The histogram also gained strength. Both are bearish signals.
- 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 unchanged and near 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 down signal in place and into oversold readings.
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 back 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 and returning to negative readings. It has not been negative since mid-July.
- 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:
4350 is strong resistance
4325 is strong resistance
4300 is strong resistance
4290 is light resistance
4275 is light resistance
4265 is light resistance
4250 is stronger resistance
4220 is light resistance
4200 is light resistance
4150 is light support
4100 is light support
4050 is light support
4025 is light support
4000 is light support
3975 is light support and is a decline of 17.5%
Stock Market Outlook for Tomorrow – Tue Aug 30 2022
For Tuesday there is a better chance for another bounce attempt that should push beyond 4060. This is not a return to the rally. Instead it will be just a bounce before more selling returns, possibly as early as Wednesday.
The technical indicators have turned bearish and many are oversold. That will help propel a bounce. Just remember, this bounce is not changing market direction. Direction is still lower.
Potential Market Moving Events
The big events this week are on Tuesday when we get consumer confidence and Friday when we get August non-farm payroll numbers. Both of these will affect market action.
Tuesday:
9:00 S&P Case-Shiller U.S. home price index (year-over-year)
10:00 Consumer Confidence Index is expected to rise to 97.4
10:00 Job openings and Quits
Two Fed Presidents speak on Tuesday. Both are expected to continue the hawkish tone.
Stock Market Outlook Archives
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Stock Market Outlook for Mon Nov 11 2024 – Overbought – Higher Still
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Morning Investing Strategy Notes for Thu Nov 7 2024
Stock Market Outlook for Thu Nov 7 2024 – All About The Fed – Higher
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Stock Market Outlook for Wed Nov 6 2024 – Election Rally Continues
Morning Investing Strategy Notes for Tue Nov 5 2024
Stock Market Outlook for Tue Nov 5 2024 – Choppy and Weakness Ahead Of Election
