The market direction outlook for Friday was almost a stalemate. The strong overbought condition could take the market either way, up or down, but only slightly. In the end stocks saw slight losses in the S&P and Dow and gains in the NASDAQ. Much of the action on Friday swung under the comments from Yellen which basically didn’t add anything new for investors and by the Ukrainian crisis which saw Russia send in “humanitarian aid” without Ukraine’s permission. Investors found both of these somewhat unsettling, but with the market direction still up, stocks had a sideways day.
SPX Market Direction Intraday One Minute Chart
The one minute chart below shows that most of the action was above 1988 for the day. You can see how often the 1988 valuation held the market up on Friday. Only once, late in the morning, did investors push stocks below 1988. Even the close was at 1988.40.
Advance Declines For August 22 2014
Volume on Friday was even worse than during the week with just 2.3 billion shares traded. So many investors are away for the end of August that volumes are incredibly poor. This at times, can swing stocks widely so it bears keeping an eye on stock movements. Of the volume traded 62% was down. However just 18 new lows were made while 105 stocks made new highs. Again the bulls are well in charge of this market.
Market Direction Closings For August 22 2014
The S&P closed at 1988.40 down 3.97. The Dow closed at 17,001.22 down 38.27. The NASDAQ closed at 4538.55 up 6.45.
The Russell 2000 IWM ETF rose just 1 cent to $115.21 but stayed above the 50 day simple moving average (SMA).
Market Direction Technical Indicators At The Close of August 22 2014
Let’s review the market direction technical indicators at the close of August 22 2014 on the S&P 500 and view the market direction outlook for August 25 2014.
Stock Chart Comments: The market is now within an easy reach of the 2000 valuation. Again the 1975 level is the most important valuation at the present time.
1975, 1956 Support: Both are light support and both may be tested in coming days but for the time being stocks look set to try to challenge the all-time high.
Strong Support Levels are at 1870 and 1840. At present I am not expecting any break of either of these levels.
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 12% 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.
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 but fell back on Friday.
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. MACD continued to climb on Friday.
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 still heavily overbought which can continue at this level for some time yet before pulling back, however a pullback to reduce the overbought condition can happen at any time.
Rate of Change: Rate Of Change is set for a 21 period. On Friday the Rate Of Change stayed positive although it is just above neutral at this time.
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 down and is extremely overbought.
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 signaling up for stocks and is extremely overbought.
Market Direction Outlook And Strategy for August 25 2014
We are starting to see some weakness drift into stocks. At this point the weakness is being brought about by the overbought nature of the market. The Slow Stochastic is signaling market direction is down and the Rate Of Change is positive but just barely. However the other indicators are moderately bullish even after last week’s slight dip.
With the technical indicators still overwhelming positive, the outlook for stocks for Monday is for some weakness to continue but in general stocks are looking like they are preparing to push to 2000.
I am continuing with my trades and still looking for further opportunities for the start of the last week of August 2014.
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