The market direction outlook for Tuesday was controlled by the price of oil. If oil rose the rally would resume. If it fell, stocks would move lower. This has been the pattern since late December and today was no different.
Added into the mix today was the news that OPEC and Non-OPEC countries were planning to discuss ways to reduce the glut of oil which is now at the highest level in 2 decades. This boosted the price of oil which to me seems odd considering the answer to oil’s glut is obvious as countries like Saudi Arabia and now Iraq continue to flood the markets. Exactly how a meeting was going to resolve this I can only guess. The other item that made the rounds today was the rumor that the Federal Reserve would somehow enter into some form of Quantitative Easing once again if the economy continued to weaken.
Energy stocks led most of the rally on Tuesday although gains by Procter and Gamble, Johnson and Johnson and Dow stocks following better than expected earnings, also assisted. After hours Apple Stock reported a slight decline in revenue but better than anticipated earnings.
Index Closing Prices
All the indexes closed near their highs. The S&P closed at 1,903.63 up 26.55 and almost wiping out yesterday’s loss. The Dow Jones rose to 167,167.23 up 282.01 for a gain of 1.78%, half a percent higher than yesterday’s loss. The NASDAQ closed at 4,567.67 up 49.18 for a gain of 1.09% which recovered about three-quarters of yesterday’s loss.
Advance Decline Numbers
Volume on Tuesday came in at 4.35 billion with 90% of all volume moving higher. There were 74 new 52 week lows a decline from yesterday’s 103. There were 20 new highs up slightly from yesterday’s 17.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Jan 26 2016
Stock Chart Comments:
The rally back has placed the index back at the same levels as we saw on Friday. This is a good sign for the market although some would argue with good reason, that the market is actually showing signs of stress each time it reaches the 1900 level as sellers arrive whenever the S&P reaches that level.
The 50 day has not fallen below the 100 day but instead has turned sideways.
All the other major moving average continue to fall.
The first goal of the market is 1920 and Tuesday that goal was not reached.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 2100 was light support. Stocks have been unable to stay above this level. It remains resistance.
2075 was light support and is also resistance. Below that is 2050 which was also light support and now resistance.
Stronger support was at 2000 which is now resistance.
Weak resistance is at 1970 while stronger resistance is at 1956 and technically it is more important than 1970 for the market. 1940 was light support and is now resistance. 1920 was light support and is also resistance. 1900 is more symbolic than anything else.
1870 and 1840 are still trying to support the markets but sellers will easily be able to overcome these technical support levels should selling erupt again. 1820 is light support.
1775 and 1750 are both 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 all-time high of 2134.72. This would be the biggest correction since 2011 plunge of 271 points for a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market is finished.
Momentum: For momentum I use a 10 period when studying market direction. Momentum on Tuesday was negative but it is rising.
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 4. The sell signal continued to weaken on Tuesday and could turn to a buy signal shortly if the market can keep climbing.
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 moving higher.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and moving sideways. The reading at the close was negative 7.78 which once again is signaling the market entering oversold. The readings this negative are often followed by bounces in the index.
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 no longer oversold and is pointing up 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 pointing up for stocks and is not oversold.
Market Direction Outlook for Jan 27 2016
If oil can can rally further on Wednesday, the S&P will move higher. There could be some selling at the open on Wednesday but that weakness should be expected. From that weakness I am expecting the rally to continue.
If oil however falls then the rally should fizzle out and the market drift lower once again.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links
IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info