I trust everyone had a terrific New Year’s holiday.
On Friday Dec 30 the S&P closed down slightly at a loss of just 9 points after bouncing off the 3800 support level.
The NASDAQ lost just 11 points to close at 10466.
Volumes on both indexes were low due to the New Year’s holiday long weekend. On Friday a new down signal was generated.
Let’s review the closing technical indicators from the SPX on Fri Dec 30 2022 to see what to expect for Tue Jan 3 2023.
Stock Market Outlook Chart Comments At The Close on Fri Dec 30 2022
On Fri Dec 30 the S&P closed below all moving averages for the 8th trading day but still managed to stay above the Lower Bollinger Band. This is still bearish.
The closing candlestick is bearish to start the New Year but still offers some hope for a possible bounce attempt.
The Upper Bollinger Band is turning lower which is bearish. The Lower Bollinger Band is turning sideways which is also bearish.
The 200, 21 and 100 day moving averages are falling. The 50 day is starting to turn sideways.
The 21 day moving average fell below the 100 day moving average on Friday. This negates the Nov 30 up signal.
That means there are are now 5 down signals in place since April 24 and only one up signal.
The chart is 80% bearish for Tuesday but historically the first trading day of the New Year has been positive 70% of the time since my records from 1974 to present.
Stock Market Outlook review of Fri Dec 30 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising 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 Tuesday Dec 6 2022. On Friday the down signal lost strength. The histogram also lost strength.
- 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 rising and positive.
- 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 an up signal in place and trying to push above 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 negative.
- 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 negative.
- 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:
4050 is resistance
4030 is resistance
4025 is resistance
4000 is resistance
3975 is resistance
3965 is resistance
3950 is resistance
3925 is resistance
3900 is resistance
3875 is resistance
3850 is good support
3830 is light support
3810 is light support
3800 is good support
3775 is good support
3750 is good support
3730 is light support
3725 is light support
3715 is light support
3700 is good support
3685 is light support
Stock Market Outlook for Tomorrow – Tue Jan 3 2023
For Tuesday the technical indicators are a bit mixed but the bias is still slightly more bullish than bearish to start the year.
Historically since I have kept records from 1974 to the present, the first trading day of a New Year has been positive 70% of the time and in the third year of a 4 year Presidency, the first day has been positive 80% of the time. However looking back through my records I do not have a start to a New Year with a new down signal being generated on the final trading of the prior year. Tuesday then is a bit of a toss-up but the 3800 level has held up throughout all of last week which is a good sign to start the first week of January 2023.
Volumes were poor on Friday but today we should see volumes begin to return to normal as many investors return from holidays this week.
For Tuesday Jan 2, the technical indicators are split on the outlook, up or down but the new down signal and the S&P chart are decidedly bearish. For that reason we could see a down day on Tuesday. That said the closing candlestick on Friday is pointing to a potential bounce. What is perhaps most important, there are no signals advising that the index will be moving significantly lower to start the year off. For Tuesday expect a down day but don’t be surprised if the day ends higher. Just remember not to get dragged into rally thinking this marks the end to the weakness from last week.
Potential Economic and Political Market Moving Events
Two big events this week could swing markets. On Wednesday we get the FOMC minutes at 2:00 PM which could shake some investors if they minutes continue to be hawkish for further interest rate increases to start off 2023.
The second event is the December non-farm payroll numbers due out Friday morning at 8:30. The jobs numbers are often the largest single market moving event on a regular basis. I will be putting together a trade on Thursday to try to profit from Friday’s jobs report.
Tuesday:
9:45 S&P manufacturing PMI for December
10:00 Construction spending for November
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Stock Market Outlook for Fri Nov 15 2024 – Choppy With Bias Lower
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