Stock Market Outlook for Tue Oct 26 2021 – New Highs Expected But Then A Dip Is Possible

Monday saw rising volumes and new highs for the Dow and the S&P. The S&P climbed 21 points for another new closing high of 4566 and intraday it reached 4572.62 just 27 points from 4600.

The NASDAQ closed up 136 points at 15226 just 177 points away from its all-time high. The S&P though is moving a bit ahead of itself. If it reached 4600 by Tuesday or Wednesday, it would be among one of the fastest 100 point gains in 5 years.

Let’s review the closing technical readings from Mon Oct 25 2021 to see what is in-store for Tue Oct 26 2021 and we continue with Halloween Week.

Stock Market Outlook Chart Comments At The Close on Mon Oct 25 2021 

The index closed just below the Upper Bollinger Band for a second day. This is beginning to show a decline in momentum.

Monday’s closing candlestick is bullish but also signaling a possible change with a dip on Tuesday or perhaps Wednesday. Nothing big, but a potential slowdown to the current advance.

The Upper Bollinger Band is still rising and the Lower Bollinger Band is still falling, both of which is bullish.

The 21 day moving average which fell below the 50 day last week, is still turning higher and could cross above the 50 day shortly. This is bullish.

The 50 day is also turning higher as is the 100 and 200 day moving averages. This is bullish.

For Tuesday the only signal of concern is the closing candlestick from Monday, warning the advance could slow for a day or two.

Stock Market Outlook review of Mon Oct 25 2021

Stock Market Outlook: Technical Indicators Review:

Momentum: Momentum is rising and positive.

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

MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Wed Oct 13 2021 . On Monday the up signal was still strong although both Friday and Monday the strength slip slightly each day.

• 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 trending sideways rather than up or down and signaling overbought.

• 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 still very overbought..

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 trending sideways and still 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 also trending sideways.

• 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:

4550 is resistance

4525 is resistance

4500 is support

4490 is support

4475 is support

4450 is support

4400 is support

4370 is light support

4350 is light support

4300 is light support

4290 is light support

4270 is light support

4250 is good support

4225 is light support

4200 is good support

4175 is light support

4150 is light support

4100 is good support

 Stock Market Outlook for Tomorrow – Tue Oct 26 2021 

The technical indicators on Monday didn’t react to the continued advance but instead most turned sideways which often indicates the market will slip slightly or present a flat day or even two days. If there are advances they are usually smaller.

The biggest problem with these signals though is the amount of enthusiasm among investors who are continuing to pour capital into stocks. That could keep the rally going for yet another day.

For Tuesday then, watch for the rally to make another new high on Tuesday intraday, but then possibly flatten out or even dip slightly in the afternoon. The close though could still be positive.

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