On Monday the S&P dipped as expected but broke below 4525 to reach 4517 before buyers returned. That marked the low of the day around 12:20 and from there buying was steady. By the end of the day the index had risen 32 points to close at 4575. This places the S&P at the top of the rallies from Feb 2 and Feb 9. A break and close higher from here will setup the S&P to challenge the 4600 level which the SPX last saw on Jan 18.
The NASDAQ ended the day higher by 1.3% to close up 185 points at 14,354 and back above the 200 day moving average. On Tuesday it should be expected that dips will retest the 200 day moving average but indicators are pointing to a second close above 200 for Tuesday on the NASDAQ.
Let’s review the closing technical indicators from Monday to see what to expect for Tuesday.
Stock Market Outlook Chart Comments At The Close on Mon Mar 28 2022
The SPX index rose higher again on Monday and is following the Upper Bollinger Band higher. This is bullish.
The Upper Bollinger Band is still moving higher and the Lower Bollinger Band is turning lower. Both are bullish.
The closing candlestick on Monday is bullish but once again has a long shadow (tail) which is signaling overbought. Dips are still likely and could be deeper than expected, such as we saw on Monday.
The 21 day moving average is moving higher which is bullish. The 200 day moving average is also back at the 4400 level which is bullish. If the index continues to stay above the moving averages, the 50 day moving average will not fall below the 200 day but instead will climb higher. This would be a major up signal if the 50 day were to cross above the 100 day this week. The 100 day moving average has not fallen further but is trending sideways. You can see in the chart that the 100 day was tested throughout the past week, held up and on Friday the index broke clear of it. These are bullish signs.
The SPX still has 4 down signals in place.
The chart is more bullish again by Monday’s close. The signals indicate the rally has slowed and stocks in general, are overbought. Tuesday will see further dips but a higher close possibly to 4590 is a strong possibility.
Stock Market Outlook review of Mon Mar 28 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising and positive. The momentum reading on Monday was 109.64. Again, this is the highest reading since April 2020 when the index was climbing out of the pandemic collapse. Momentum readings this strong won’t last much longer.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal Wed Mar 16 2022. On Monday both the MACD up signal and the histogram have the highest readings also since April 2020. Again they point to more upside this week but these are very high readings. Dips back are likely if not on Tuesday certainly during this week.
- 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 overbought signaling a dip is likely.
- 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 weak up signal in place and is extremely overbought. Signals are at the point where they are so high, a dip can happen at any time.
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 rising and signaling overbought.
- 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 back which indicates dips should be expected but large price changes are not expected.
- 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 strong resistance
4590 is resistance
4575 is resistance
4560 is resistance
4550 is resistance
4525 is resistance
4500 is resistance
4490 is light resistance
4475 is light support
4450 is light support
4400 is support
4370 is light support
4350 is light support.
4300 is good support
Stock Market Outlook for Tomorrow – Tue Mar 29 2022
Leaving aside ramifications from the Ukraine-Russia war should it escalate, the technical indicators are extremely overbought. They can remain this way longer but it becomes more unlikely the longer they stay here. A dip back is becoming more likely each day. On Tuesday expect dips to once again be deeper. The close still looks positive based on the strength of the signals and the Rate Of Change which advises that a large change in prices is not expected. The close though might be just slightly positive on Tuesday.
Potential Market Moving Events
I will keep these comments up this week.
The final week of March has many events that could impact the market. Friday we get the March non-farm payroll and hourly wages report which have often changed the market direction even temporarily. Aside from all the other reports, a number of Fed Presidents are also speaking which probably means a hawkish number of addresses. Each of the Fed speeches could dip the indexes. None of the speeches are expected to be dovish and none are expected to discuss a quarter point rate increase going forward. That means this week we need to take advantage of the speeches to setup trades on dips. Here are the main events for the week that I think could see dips and possibly a few spikes in the markets. Anything that points to a dip in inflation numbers will result in the index rising.
Tuesday:
On Tuesday we get the Case-Shiller National house price index, the FHFA national house price index, Consumer Confidence Index, Jobs Opening and Quits and two Fed Presidents speak. Fed President Harker speaks at 10:45 and Atlanta Fed President Bostic at 6:30 PM. Harker’s speech may dip stocks but not Bostic who speaks after trading closes. Meanwhile housing numbers are going to show a slow-down is starting or already underway. This may slow the rally on Tuesday but at the same time, it becomes less inflationary if housing is slowing. Therefore stocks could surprise with more strength that expected on Tuesday.
Following Days:
Wednesday:
On Wednesday we get the ADP employment report, the GDP revision, the Gross Domestic Income, Corporate profits and two more Fed Presidents speak. Richmond Fed Barkin speaks at 9:15 and Kansas City Fed President George speaks at 1:00 PM. Both speeches could dip stocks. Barkin could dip Wednesday’s open allowing for a SPY call trade to be setup. George could dip stocks coming out of the lunch hour.
Thursday:
Thursday is initial jobless claims, continuing jobless claims, nominal personal income and consumer spending, PCE price index, Core PCE price index, Real Consumer Spending and the Chicago PMI. No Fed’s speak on Thursday but these are inflation reports which could dip or rally stocks. All of these are before the open except the Chicago PMI.
Friday:
Friday is the big one – the March nonfarm payroll numbers and unemployment rate and average hourly earnings. This is often a market moving event which can last a week or longer. I will be putting together a SPY ETF trade on Thursday ahead of those numbers and posting it for Members. I will post the outline being considered in Thursday’s morning Investing Strategy Notes before markets open on Thursday.
On Friday at 9:05 Chicago Fed President Evans is speaking before markets open. At 9:45 we get the Market Manufacturing PMI. At 10:00 we get the ISM manufacturing index and construction spending. At no set time in the morning we should get motor vehicle sales which are estimated to reach 14.1 million. This could be a bullish signal but the big one is the March unemployment report. It will overshadow all the other Friday reports.
This promises to be an exciting week for stocks but in general the market is bullish to start and looks bullish heading into Friday’s unemployment report. Monday morning I will be buying SPY calls on any early morning dip.
Stock Market Outlook Archives
Stock Market Outlook for Fri Nov 15 2024 – Choppy With Bias Lower
Stock Market Outlook for Thu Nov 14 2024 – Choppy – Dips Possible But Higher Close
Morning Investing Strategy Notes for Thu Nov 14 2024
Morning Investing Strategy Notes for Wed Nov 13 2024
Stock Market Outlook for Wed Nov 13 2024 – Choppy Trading Bias Lower
Morning Investing Strategy Notes for Tue Nov 12 2024
Stock Market Outlook for Tue Nov 12 2024 – Overbought – Dips Likely But Bullish
Morning Investing Strategy Notes for Mon Nov 11 2024
Stock Market Outlook for Mon Nov 11 2024 – Overbought – Higher Still
Morning Investing Strategy Notes for Fri Nov 8 2024
Stock Market Outlook for Fri Nov 8 2024 – Overbought – Dips Likely But Higher Close
Morning Investing Strategy Notes for Thu Nov 7 2024
Stock Market Outlook for Thu Nov 7 2024 – All About The Fed – Higher
Morning Investing Strategy Notes for Wed Nov 6 2024
Stock Market Outlook for Wed Nov 6 2024 – Election Rally Continues
