The outlook for Wednesday Feb 4 was for stocks to show weakness but still keep an upward bias. During the day we saw weakness and a rally into the close that suddenly collapsed thanks to the ECB comments on Greek debt. If not for the Greek debt issue, the markets would have ended the day higher. These are the catalysts that are difficult to prepare for.
Advance Decline for Feb 4 2015
Volume was decent again today with 4.1 billion shares traded. Only 114 new highs though and 23 new lows. The rally turned stale today. 64% of volume was to the upside while 34% was to the downside.
Market Direction Closings For Feb 4 2015
The S&P closed at 2041.51 down 8.52. The Dow closed at 17,673.02 up 6.62. The NASDAQ closed at 4,716.70 down 11.03.
Market Direction Technical Indicators At The Close of Feb 4 2015
Let’s review the market direction technical indicators at the close of Feb 4 2015 on the S&P 500 and view the market direction outlook for Feb 5 2015.
SPX Market Direction Technical Analysis for Feb 4 2015
Stock Chart Comments:
The S&P rally today stalled and left the SPX below 2050 and back just below the 50 day moving average. A Bollinger Bands Squeeze continued to form.
Support and Resistance Levels:
These are the present support levels.
2075 was light support and is now resistance. Below that is 2050 which was light support and is now resistance again. 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 positive amd falling. At 100.46 it is nearing neutral.
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 today which has to be confirmed on Thursday.
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 climbing toward overbought.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is back positive and turned up dramatically yesterday but is now sideways and pointing to a possible stall in the rally.
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 issued an up signal for stocks.
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 and yesterday had a strong buy signal in place. Today it turned sharply lower despite still have an up signal in place.
Market Direction Outlook and Strategy for Feb 5 2015
Technically there is a lot of indication that stocks should still hold a bias up. There are though signals that conflict and show that the rally of the past two days may already have run out of steam. This is what happened with the first January rally which after just two strong days, pulled back and tested the 2000 support level.
The volatility remains high and whipsaws continue to irritate investors. Using tight stops will mean often being stopped out of positions but as long as there are profits, this may be the best bet. The outlook is very mixed for Thursday and we also get the Weekly Initial Unemployment Insurance Claims. The morning could be down with a rally attempt over the lunch hour and into the afternoon. If the morning is primarily lower, the late afternoon will probably see more downside into the close.
Despite the technical indicators which still show some strength, my personal outlook is for a mixed day but the Fast Stochastic is probably agreeing with me that we will see a lower close on Thursday. Therefore the outlook is mixed.
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