The outlook for stocks for Tuesday was for stocks to push higher despite being overbought. Instead stocks closed the day with small losses as concern over Europe seemed to dominate many investors. The Case Schiller home price index rose by 0.76 percent in October versus an expected rise of 0.4 percent. The past 12 months has seen a price rise of 4.5% which is what the general consensus had been for the year. Meanwhile consumer confidence rose to 92.6 in December which is pretty well expected considering the drop in gasoline prices and improving unemployment numbers. However economists in general had an average expectation that this number would come in at 93.9 which I thought was a bit high considering November consumer confidence was 88.7 which was already among the highest of readings since 2007.
SPX Intraday Chart
The one minute intraday chart for today, Dec 30 2014, is interesting. It shows a gradual weakness throughout the day. The morning saw a drop within the first half hour. That drop was contained and the market then trended in a sideways pattern with a gradual decline present through the morning and lunch hour. Shortly after lunch stocks tumbled again breaking to the lows for the day. Investors stepped back in and bought stocks again, taking advantage of the drip but the pattern was again sideways but weaker than the morning sideways trading period. The index then fell into the close for the day. All in all, not a very inspiring day but whereas it did show signs on consolidation, it also exhibited signals that the rally is weaker than possibly expected.
SPX Intraday for Dec 30 2014
Advance Decline for Dec 30 2014
Volume was identical to Monday with 2.4 billion shares traded. Down volume made up 60% of all trades and 36% of volume higher. New highs really dropped off,f falling to 23 which was 50% of Monday’s new highs. New lows though rose to only 45, which does not indicate much more than consolidation of gains. Still though the new highs for the past several trading days have been poor and do not reflect a market in a strong Santa Claus rally mode. This rally may be ending sooner rather than later.
Market Direction Closings For Dec 30 2014
The S&P closed at 2,080.35 down 10.22. The Dow closed at 17,983.07 down 55.16. The NASDAQ closed at 4,777.44 down 29.47.
Market Direction Technical Indicators At The Close of Dec 30 2014
Let’s review the market direction technical indicators at the close of Dec 30 2014 on the S&P 500 and view the market direction outlook for Dec 31 2014.
Market Direction Technical Analysis for Dec 30 2014
Stock Chart Comments: Despite Monday and Tuesday’s positive closes, stocks are actually stuck. Today’s move lower is not all that surprising. The new highs are poor for a market in the Santa Claus rally mode. So far then the Santa Claus rally is kind of sputtering out. These are usually the best days for the rally and we are not seeing the kind of rally that has enough breadth or momentum to push to the upside. This is why two weeks ago I wrote my article on taking a cautious stance. In this environment I prefer small and short-term trades. If the rally should pick up, all the better for my trades, but if the rally falters early I won’t be holding positions as the market pulls back into the start of the New Year.
The 50 day simple moving average (SMA) is continuing to push higher breaking away from the tight sideways trend between it and the 100 day EMA from the last couple of weeks. This again points to stocks ready to break higher. The candlesticks though are flat and drifting sideways. They may fall back to the 20 day simple moving average (SMA) so this also needs to be watched.
Support Levels:
2075 has very light support. Below 2050 is strong support at 2000 and weak support at 1970. Stronger support is then at 1956. 1870 and 1840 are both levels with strong enough support to delay the market falling.
The other two support levels 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 the bottom line.
A break of 1750 would mark a severe correction 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 at this time.
Momentum: For Momentum I am using the 10 period. Momentum is positive but not as strong as in previous rallies and drifting sideways.
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 a buy signal Dec 22. Readings are pulling back slightly today and again, needs to be watched.
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 negative by the close today.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is positive and is now moving higher. This could be setting up a signal soon for a change in trend once again.
Slow Stochastic: 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. The Slow Stochastic is signaling market direction is down and it is very 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 a move down for stocks and it too is overbought.
Market Direction Outlook and Strategy for Dec 31 2014
For the final day of the year stocks look set to try to rally but overall the weakness that keeps creeping in looks set to move stocks back to the 20 day simple moving average (SMA) before deciding whether to push higher or not.
MACD, the Rate Of Change, Fast Stochastic, and Slow Stochastic need to be watched. Signals are appearing warning that the rally could be running on empty here and ready to end. This would be a very short Santa Claus rally if that happens.
The outlook for the final day is a slightly negative close, but many indicators point to consolidation of stocks rather than anything big to the downside about to occur. We could therefore see a slightly positive close but there are far more indicators pointing to a lower index for the final day of trading this year, than a rise.
Market Direction Outlook – Changes
There are changes coming with the New Year for the daily Market Direction Outlook. The outlook will be expanded into a series of daily articles that will include a daily comment on trading the market direction portfolio which this year doubled in value. There will also be a daily Trading For Pennies Strategy article which will be incorporated into the Market Direction Outlook. The outlook will also include a daily strategy discussion which will extend into the investing strategy notes before the markets open and the trade ideas for the week.
New Forums For Members
New forums for members will commence on January 2. There is a separate members forum for the USA and Canada sites where discussions can be more open on a wider variety of topics including questions and answers for members. This forum is separate from my Yahoo forum which is a public forum and which will remain open. For those trying to follow trades as they happen, my twitter account is still the quickest way to get a trade alert but the members only forums will allow for more depth to trades and discussions of strategies and which strategies to consider as investors move into 2015. I am expecting 2015 to be more volatile and I believe more strategies will be needed for trading success in 2015.
All members are automatically enrolled in the new forums when members login. This will make it easy to post messages and replies for all members. More on gaining access will be emailed to members shortly.
Membership Price Increase
Starting January 1 2015, I have outsourced most of the maintenance work for the new forums, my website, server maintenance, emails and my daily newsletters. This will allow me more time to focus on research, updating trades quicker, posting more trade alerts and especially trade ideas, delving deeper into more strategies, expanding on existing ones and answering more emails. Many investors wrote to me in 2014 and I could not reply to all. By outsourcing technical work I will have more time to reply. In general outsourcing will allow me to expand the content on my site for all members, keep trades up to date, answer more questions and do a bit more hand-holding, especially as we enter 2015. There will be a slight increase in membership fees January 1, to assist in covering some of the outsourcing costs. Members may renew at present prices for any period until the price change on January 1.
I appreciate the support from everyone who has been a member, either past or present. My warmest wishes for a very Happy New Year and all the best for a healthy and successful 2015. Next year promises to be another exciting year of investing. I hope you will join me.
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