Tuesday opened with a bounce higher in the SPX which immediate was met by sellers. Selling volume though dried up quickly and the dip only saw the S&P down to 4590 shortly after 10:00 AM. A small rally immediately after the dip failed and the index slipped back once again late in the lunch hour. As Kansas City Fed President George spoke starting at 1:00 PM and word of further peace talks in the Ukraine-Russia war reached investors, buying returned and remained steady throughout the rest of the day. The index closed just off the highs of the day up 56 points to 4631. The NASDAQ rose 264 points to end the day at 14619. Both indexes remain heavily overbought as investors who missed the earlier recovery rally and rushing to get into stocks that are already overbought and at much higher prices.
Let’s review the closing technical indicators from Tuesday to see what to expect for Wednesday.
Stock Market Outlook Chart Comments At The Close on Tue Mar 29 2022
The SPX index rose higher again on Tuesday and continues to pressure the Upper Bollinger Band in one of the strongest rallies since the pandemic recovery rally back in early 2020. The index closed above all major moving averages for the fourth straight day.
The Upper Bollinger Band is still moving higher and the Lower Bollinger Band is turning lower. Both are bullish signals.
The closing candlestick on Tuesday is bullish but is signaling overbought and a chance for a negative close is increasing for Wednesday. Dips are still likely but with so many buyers anxious to get back into stocks, it is hard to say how deep dips will be.
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. These are bullish signs.
The SPX still has 4 down signals in place but if the 21 day crosses above the 200 day it will be a major up signal supporting the bulls.
The chart is more bullish again by Tuesday’s close. The signals indicate the rally has slowed and stocks in general, are overbought and while there is a good chance we could see a negative close, the chart shows tremendous strength so another higher close is still likely.
Stock Market Outlook review of Tue Mar 29 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is falling and positive. Momentum dipped back on Tuesday, which is expected.
- 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 Tuesday 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 Wednesday 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 rising which indicates investors should expect wider price movements on Wednesday, either up or down.
- 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:
4650 is resistance
4640 is resistance
4625 is resistance
4600 is strong resistance
4590 is resistance
4575 is light support
4560 is support
4550 is light support
4525 is light support
4500 is support
4490 is light support
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 – Wed Mar 30 2022
For Wednesday the index is facing another day of an extremely overbought market. The 4600 level is strong resistance and it has not been tested. On Wednesday we could see the index slip back to test 4600. However with so much money out of the market now rushing to get back into the market, dips of any size are quickly finding buyers. That means that while the outlook is for a chance for a negative close, the likelihood of a higher close is probably greater.
On Tuesday the Case-Shiller reports showed housing prices in general rose across the USA rather than fell. This may show up in inflation reports due out this week and next and could impact or slow the rally higher if inflation is running hotter than investors think.
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.
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.
Following Days:
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
