Stock Market Outlook for Tue Nov 3 2020 – Oversold and Higher On Election Day

Monday’s ISM number for October jumped to 59.3%, up from September’s 55.4%. This was the highest PMI since September 2018. The number indicates expansion in the overall economy and is the 6th month in a row of growth after April’s contraction. New orders jumped 67.9% a huge 7.7% increase from September’s reading of 60.2%. The economy is continuing to recover from the Covid lock-down and investors jumped back into stocks. Thanks to a very oversold market some stocks rallied hard although the NASDAQ was negative for much of the morning. By the end of the day the Dow Jones was up 423 points to 26,925 on the verge of closing back above 27,000. The NASDAQ had the poorest showing, but still rose 46 points to close at 10,957 and within easy reach of closing back above 11,000. The S&P closed up 40 points for a gain of 1.2% to close at 3310.24, back above 3300.

Stock Market Outlook Chart Comments At The Close on Mon Nov 2 2020 

Monday’s rally helped the index to close above the 100 day moving average which is positive. It left behind a bullish candlestick for Tuesday.

The Upper Bollinger Band is still rising and the Lower Bollinger Band is is turning sideways. The 21 day moving average is also starting to turn up while the 50 day is still falling. The 100 and 200 day moving averages are still rising.

The up signal from Oct 21 is still in play, but if the 21 day falls below the 50 day this week, it will negate that signal and start a new down signal.

In general the chart remains bearish but there are more bullish signs after the rally on Monday.

Stock Market Outlook review of Mon Nov 2 2020

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising, negative and not oversold.

• Settings: For momentum I use a 10 period when studying market direction.

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Oct 25. On Monday the down signal was weaker and still showing oversold.

• 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 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 an up signal in place and is very 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 rising and 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 which indicates on Tuesday we could see higher prices.

• 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:

3600 is resistance

3500 is resistance

3450 is resistance

3400 is resistance

3375 is resistance

3300 is resistance

3275 is support

3200 is support

3150 is support

3050 is support

3000 is support

2975 is light support

2950 is light support

2900 is light support

 Stock Market Outlook for Tomorrow – Tue Nov 3 2020 

Into election day the markets look stronger than on Friday Oct 30. The ISM number was excellent and shows the economy is expanding after the lock-down. On Friday we get the October unemployment report which if it shows continued job growth will push stocks higher.

For Tuesday the indexes should continue to rise, albeit probably not as much as we saw today as Tuesday is Election Day.

The S&P will probably dip back below 3300 intraday on Tuesday but close above 3310 by the close of the day. Dips are opportunities for some intraday trades.

Whatever happens on Tuesday though, Wednesday will see the bigger reaction to the initial outcome of the Elections.

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