Friday was quite the day with the market direction breaking the 50 day moving average as it climbed from the outset and then collapsing mid-morning with the news from Ukraine. By the afternoon investors seemed like they wanted to shrug off the news and by the close the SPX was down by just 12 cents. It was a wild day for investors. Meanwhile crude rose $1.77 but gold, which many consider a safe haven, fell $9/50 but still hung on to the $1300 level closing at $1306.20 an ounce.
Market Direction SPX Intraday Chart August 15 2014
Friday’s wild day can be seen in the one minute chart below. The market opened higher and moved above the 50 day simple moving average (SMA). The market continued to gain until news of the Ukraine – Russia conflict hit the market dropping it just over 22 points by noon hour. The market though failed to break through 1940, bottoming at 1941.50. This seemed to catch the attention of investors who spent the afternoon buying back stocks and pushing the index higher. By the close the index was just below 1956 or the 50 day simple moving average (SMA) closing at 1955.06.
Advance Declines For August 15 2014
Volume was only slightly higher on Friday with 3 billion shares traded. By the end of the day 47% of issues were advancing and 49% were declining. Down volume though made up 55% of all shares traded. Meanwhile 101 new highs were made and there were 33 new lows. The bulls still held sway on Friday breaking back through 100 new highs which bodes well for Monday.
Market Direction Closings For August 15 2014
The S&P closed at 1955.06 down just 0.12. The Dow closed at 16,662.91 down 50.67. The NASDAQ closed at 4464.93 up 11.92.
The Russell 2000 IWM ETF was up at $114.45 early in the day but fell to $112.26 by noon. It closed down 22 cents at $113.39 making a fairly impressive comeback on the day.
Market Direction Technical Indicators At The Close of August 15 2014
Let’s review the market direction technical indicators at the close of August 15 2014 on the S&P 500 and view the market direction outlook for August 18 2014.
Stock Chart Comments: The market remained resilient on Friday in the face of a plunge in the morning and a buy back in the afternoon. The S&P still is ready to break through the 50 day simple moving average (SMA) to the upside.
1975, 1956 Support: These two support levels have been broken and will now act as resistance. 1956 looks ready to support a break to the upside.
Strong Support Levels are at 1870 and 1840. The 1870 level is below the 100 day EMA so I am expecting this pullback to reach that far but a lot now depends on how strong the recovery bounce may be. 1840 is below the 200 day EMA and would mark a serious correction. A break of 1870 is a definite signal that those investors not holding Ultra short ETFs or SPY PUT Options 2 months out, should be doing so by this point for a bigger move lower.
The other two support levels not shown in the chart above are 1775 and 1750. I have explained that these two are critical support for the present bull market. While 1775 is important it is 1750 that is now the bottom line.
A break of 1750 would mark a severe correction of more than 10% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating as there are no signs of any impending correction of that magnitude. If stocks did get this low it would become questionable if the correction would move down at least another 5%.
My Pullback Outlook: I have been waiting for a pull-back this summer to between 1870 to 1919. The market fell to 1910 in the recent pullback last week before bouncing back on Friday. At present that may have been the extent of the drop I was anticipating.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is positive.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued buy signal on Friday August 15. The last signal was a sell signal on July 8. This signal is unconfirmed and must be confirmed this week.
Ultimate Oscillator: 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. The Ultimate Oscillator is overbought and turned lower on Friday.
Rate of Change: Rate Of Change is set for a 21 period. Today the Rate Of Change failed to turn positive due to the pullback in the morning. Monday may see the Rate Of Change turn positive.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is up.
Fast Stochastic: For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is also signaling up for stocks.
Market Direction Outlook And Strategy for August 18 2014
The technical indicators are ar less mixed despite the wild day on Friday. With a buy signal from MACD on Friday combined with positive signals from Momentum, Ultimate Oscillator, Fast Stochastic and Slow Stochastic only the Rate Of Change is negative. The Rate Of Change though looks ready to turn positive on Monday.
Except for further “bad” news out of Ukraine, I am expecting a bounce at the open, followed by slight weakness and then a move higher into the close. We may once again see the day’s high early in the morning but on Monday there is a good chance the close may be near the high.
I am continuing to sell puts and look for trade opportunities and have already placed some orders against the 10 trades I wrote about this evening.
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