Friday was another large down day for stocks but again intraday, the VIX Index spiked to almost 30 but then closed at 27.75, down 1.28% on the day as there was no panic type selling, even with the index fell to 4330 and was unable to rebound to 4400, the 200 day moving average. Many investors are convinced that the selling will end soon and markets will rebound quickly, as they have in the past two years. Complacency remains for many investors and among many stocks. Whether they are right is anyone’s guess.
The Dow Jones lost 232 points for a drop of 0.68% and closed at 34,079, ready to fall below 34,000 which are the lows from the January sell-off.
The S&P fell 31 points for a 0.72% loss ending the day at 4348 the lowest close of the current sell-off and just above the close on January 27.
The NASDAQ had the worst day again, falling 168 points for a 1.23% loss and ended at 13,548. This is now 950 points below the 200 day moving average.
SPX Chart Jan 21 to Feb 18
The index is under increased selling pressure and looking at the chart since Jan 21 you can see the SPX index is down below the 200 day moving average and within 50 points of entering into the January correction lows. Indeed just 126 points would take the index back to the January 24 low of 4222 which marked that correction’s low. Analysts have become divided on whether the S&P will break that low or will recover quickly. With uncertainly over the Ukraine-Russia crisis sure to continue into the start of the week, the odds favor the bearish outlook.
SPX Jan 21 to Feb 18 2022
I am still holding SPY put options bought when the index was at the 100 day moving average on Feb 9th and 10th. Those are in the Market Direction Portfolio to profit should the index continues its decline, which at present seems quite likely.
The NASDAQ has been below the 200 day moving average since Jan 18. After a month of failing to recover the 200 day, this is more a signal of a bear market than a normal correction. Luckily the index is down just 16.4% from its 52 week high but for many stocks, they are already in bear markets of their own having collapsed 25% or more.
Let’s review Friday’s close to see what Tuesday and the start of the final week of February trading will look like.
Stock Market Outlook Chart Comments At The Close on Fri Feb 18 2022
On Friday the index traded the entire day below the 200 day moving average and closed below it. This is a bearish signal.
The closing candlestick on Friday is bearish but also points to a potential bounce to retest the strength of the 200 day moving average. The candlestick is also advising that any bounce will not hold and the index still has lower to move.
The Upper Bollinger Band has bounced off the 100 day on Friday. This can be seen as bullish but it needs a couple more days to prove it can rise. At present that seems unlikely and the Upper Bollinger Band looks ready to fall below the 100 day moving average which would be another down signal. The Lower Bollinger Band is turning lower, an indication of more selling probable. This is currently bearish.
The 21 day moving average on Friday tried to turn sideways. This needs another day or two to work out. For now this is still bearish.
The 50 and 100 day moving averages are falling which is bearish however the 200 day moving average is hanging on which is bullish.
The chart has two down signals in place and the index could see the 21 day fall below the 200 day this week. If that happens the January lows probably won’t hold. A lot depends on the Russia-Ukraine crisis as well as comments from the Fed and inflation numbers. Investors could easily get spooked which can send the index lower.
The chart is very bearish. It still looks set to send the index below the lows from late January, down to the 4200 level. That’s a guess which is not backed by any technical indicator at present. An invasion of Ukraine with the index this low could see 4200 quickly reached or even broken. From there 4000 would be easy to reach. That though could mark a low.
The SPX chart is very bearish and investors should stay cautious.
Stock Market Outlook review of Fri Feb 18 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 confirmed down signal on Thursday Feb 17 2022. On Friday the down signal was confirmed and the MACD histogram turned decidedly bearish. More downside is predicted.
- 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 negative and trying to rise although it looks more sideways than either up or down. This is bearish.
- 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 and now into oversold readings but with plenty of room to fall further before being extremely 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 rising indicating we could see bigger price swings in stocks on Tuesday.
- 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:
4600 is resistance
4550 is resistance
4525 is resistance
4500 is resistance
4490 is light resistance
4475 is light resistance
4450 is light support
4400 is good support and the 200 day moving average
4370 is light support
4350 is light support
4300 is good support
4290 is light support
4270 is light support
4250 is good support
4225 is light support
4200 is good support
Stock Market Outlook for Tomorrow – Tue Feb 22 2022
For Tuesday the index is set to move lower. Bounces are possible at anytime as the index slips lower but all signals advise that any bounce at this stage won’t hold. There is no resolution to the Ukraine-Russia crisis and investors remain wary of the hawkish tone from the Fed and are worried about inflation. All of these are catalysts to move the market still lower. There are no catalysts to move the market back higher for Tuesday.
There were also more sell signals on Friday.
A new confirmed down signal came from MACD on Friday and there are no indicators pointing to a rebound rally that will hold. The Rate Of Change is starting to rise which often signals wider price action in stocks should be expected, up or down. The Rate Of Change does not advise bull – bear scenarios but looks at price action to warn of more stock swings which can be buying or selling. On Tuesday it would appear to be more selling. The Upper Bollinger Band and Lower Bollinger Bands are signals further selling still to come. The 21 day moving average is closing in on falling below the 200 day which is a major down signal.
I am still holding some of the SPY Put contracts and on any bounce on Monday, I will buy more out to March 4 expiry. Odds at present favor the S&P falling to retest the January lows. An invasion of Ukraine would see a knee-jerk reaction lower. A resolution will see a bounce but there are no signs of a resolution which increases the odds of a war. Stay cautious and protected for the start of the week on Tuesday.
Don’t forget the President’s Day Weekend Membership Sale. This sale ends on Wednesday Feb 23 after which prices have to move higher as costs continue to rise especially for my two assistants who have not had a raise since 2019. For interested investors this is a chance to get a membership at a discount price, to assist navigating what looks like a rough 2022. It’s a chance to see what FullyInformed.com has to offer to profit during 2022 despite the market gyrations. For existing members this is a chance to renew at discounted prices. The 24 month special membership won’t be offered again this year. That plan slashes the membership cost by a full 30%, saving $500 and reducing the monthly cost to just $48.66. There are just three days left to take advantage of that special membership offer!
Stock Market Outlook Archives
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Morning Investing Strategy Notes for Tue Mar 4 2025
Stock Market Outlook for Tue Mar 4 2025 – Sell-Off Continues – Possible Bounce Today But Lower
Morning Investing Strategy Notes for Mon Mar 3 2025
Stock Market Outlook for Mon Mar 3 2025 – Choppy With Higher Close
Morning Investing Strategy Notes for Fri Feb 28 2025
Stock Market Outlook for Fri Feb 28 2025 – Deeply Oversold But Still Bearish
Morning Investing Strategy Notes for Thu Feb 27 2025
Stock Market Outlook for Thu Feb 27 2025 – Second Bounce Attempt Likely
Morning Investing Strategy Notes for Wed Feb 26 2025
Stock Market Outlook for Wed Feb 26 2025 – Bounce Likely Ahead of NVIDIA Earnings
Morning Investing Strategy Notes for Tue Feb 25 2025
Stock Market Outlook for Tue Feb 25 2025 – Confirmed MACD Down Signal
