The outlook for Friday ahead of the long weekend was for stocks to move higher. On Friday the day ended with the S&P at a new all-time high. The NASDAQ closed at 15 year highs and the DOW was less than 100 points from setting new highs as well.
Advance Decline for Feb 13 2015
Volume was slightly less at 3.5 billion shares which is still good volume, especially ahead of a long weekend. 65% of all volume was to the upside. 176 new highs were set on Friday and just 7 new lows. This is indicative of the saying that when the market moves higher almost all stocks, no matter how poor, usually get a lift. At 176 new highs we are still below 200 new highs which is the “magic” number that usually indicates a strong rally in progress. We have not had that type of number consistently show up for weeks. This has been part of the cause of higher than usual volatility. When new highs continue to increase steadily, volatility falls back. Since January new highs have been random which continues to influence volatility levels.
Market Direction Closings For Feb 13 2015
The S&P closed at 2,096.99 up 8.51. The Dow closed at 18,019.35 up 46.97. The NASDAQ closed at 4,893.84 up 36.22.
Market Direction Technical Indicators At The Close of Feb 13 2015
Let’s review the market direction technical indicators at the close of Feb 13 2015 on the S&P 500 and view the market direction outlook for Feb 17 2015.
Stock Chart Comments:
The S&P broke out toward the end of the day on Friday and set a new all-time high. While I would expect the S&P to pullback Tuesday morning, the new high is indicative of further moves higher for this week. The 2075 level has no real support but the 2050 level is the key at present. As long as stocks trend above that line the market will remain with an up bias.
The doji-cross from last Wednesday has not had an impact but after two up days, we could see that impact on Tuesday, especially with an overbought condition now in place on the markets. All the major support moving averages (50, 100, 200) are pointing to higher prices to come.
The 20 day SMA reached the 50 day SMA on Friday indicating still further prices advances ahead for the index.
Support and Resistance Levels:
These are the present support levels.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each recent pullback.
Weak support is at 1970. Stronger support is then at 1956.
1870 and 1840 are both levels with strong enough support to delay the market falling and should see a sideways action attempt while investors decide whether to sell or buy.
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 present.
Momentum: For Momentum I am using the 10 period. Momentum is climbing and 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 a weak buy signal Feb 4. MACD continued higher 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 positive and overbought.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is turned up and and supporting the trend higher.
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 still overbought and but continues to have a weak up signal in place.
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 has a better up signal in place than the Slow Stochastic but it too is overbought.
Market Direction Outlook for Feb 17 2015
Technically the indicators are all pointing to higher prices. This advises that stocks will move higher and the rally has more room on the upside. However the overbought indicators clearly show while there is room to the upside, the market will have weak periods and dips. I would expect weakness on Tuesday especially in the morning. We could see a move higher to open after a 3 day weekend, but then a pullback to around 10:30 or 11:00. From there I am anticipating sideways with the bias to see another new closing high.
Many stocks have not recovered from the recent period of volatility which means there is room for them to try to recover more ground this upcoming week. For Tuesday the outlook is higher but there will be dips as the market remains overbought.
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