The outlook for Wednesday for stocks was a move modestly higher. By the close of the day markets were up modestly thanks in large part to housing data showing the 2014 was the best year since 2007 for new residential construction and a Wall Street Journal report indicating that the European Central Bank would be proposing a 50 billion per month bond buying program.
Advance Decline for Jan 21 2015
Volume today was still quite good with 3.7 billion shares traded. New highs fell way back with just 111 new highs and new lows fell to 60. Volume by the close had picked up from the morning though and up volume dominated with 72% of all trades to the upside and 26% to the downside. The closing numbers of the indexes did not seem to reflect the 72% of all trades moving higher though which continues to show the tug-of-war between the bulls and the bears. However underlying currents in the advance decline rations continue to favor the bulls.
Market Direction Closings For Jan 21 2015
The S&P closed at 2032.12 up 9.57. The Dow closed at 17,554.28 up 39.05. The NASDAQ closed at 4,667.42 up 12.58.
Market Direction Technical Indicators At The Close of Jan 21 2015
Let’s review the market direction technical indicators at the close of Jan 21 2015 on the S&P 500 and view the market direction outlook for Jan 22 2015.
Stock Chart Comments:
The S&P moved above the 2020 level early in the morning and stayed above it all day, which was a good sign for further advances. Stocks closed again above the 100 day exponential moving average (EMA) and look set to try to take on the 50 day simple moving average (SMA).
The 20 day simple moving average (SMA) which is the Middle Bollinger Band is still trending just on top of the 50 day but is not falling below it, again a possible signal of more upside ahead.
Overall the S&P is still above the 200 day moving average and as such I am continuing to place small amounts of capital into positions.
Support Levels:
These are the present support levels.
2075 was light support. Below that was 2050 which was also light support. Stronger support is at 2000 which on Friday was recovered and again held the market up. Weak support is down at 1970. Stronger support is then at 1956 which should delay a further pullback by at least a day.
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 this time.
Momentum: For Momentum I am using the 10 period. Momentum is back positive today.
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 sell signal on Jan 5. MACD continues to be negative but readings are rising.
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.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is trending lower which is normally a signal that the trend change to up may not hold.
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 back to up and the signal is stronger today.
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 its signal was also stronger today.
Market Direction Outlook and Strategy for Jan 22 2015
Today’s action was better and stocks look set to try to move to the next level of resistance at the 2050 level. Technically the indicators are mixed but with all but the Rate Of Change either up, positive or at least rising, the outlook for Thursday is for stocks to continue to rise.
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