The market direction outlook for Wednesday November 12 2014 was for stocks to remain sideways but for the bias to still be to the upside. Weakness was expected for the start of the day on Wednesday. One of the more interesting developments on Wednesday was the fines levied against 5 banks for failure to stop traders from trying to manipulate the foreign exchange market. One of the names included Citigroup which fell 0.7 percent on the news.
The morning opened with a large gap down but this was seen by investors as another buying opportunity and the markets ended flat by the close.
Advance Declines For Nov 12 2014
Volume picked up slightly on Wednesday with 3.3 billion shares traded but volume was almost evenly split with 50% of all volume rising and 48% falling. There were 111 new highs and 39 new lows. The volume ratio continues to look like consolidation and not a sell-off about to erupt.
Market Direction Closings For Nov 12 2014
The S&P closed at 2038.25 down 1.43. The Dow closed at 17,612.20 down 2.70. The NASDAQ closed at 4675.13 up 14.58.
The Russell 2000 IWM ETF closed up 53 cents at $117.90.
Market Direction Technical Indicators At The Close of Nov 12 2014
Let’s review the market direction technical indicators at the close of Nov 12 2014 on the S&P 500 and view the market direction outlook for Nov 13 2014.
Market Direction Technical Analysis for Nov 12 2014
Stock Chart Comments: Stocks on Wednesday moved sideways despite a drop in the morning and a subsequent rally back. Of significance today was the 20 day simple moving average (SMA) or Middle Bollinger Band rising above the 100 day exponential moving average (EMA) flashing a buy signal for stocks. The Upper Bollinger Band continues to rise despite the market index moving more sideways than up the last several trading days.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling. 1956 and 1970 are back as support for stocks. 2000 is the highest level of support at present and while not strong, it should have enough strength to hold sellers back for at least a day in the event of an interim pullback. I am not expecting this to happen at this stage of the rally. The market direction still looks like it wants to consolidate and then possibly move higher.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% 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 still positive but not overbought.
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 on October 22. MACD is continuing to gain strength.
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 remains extremely overbought..
Rate of Change: Rate Of Change is set for a 21 period. The rate of change is staying positive and is now at 9.44 up from yesterday. The Rate Of Change is showing the market nearing overbought conditions. If the 20 day SMA can move higher and above the 50 day EMA stocks will definitely move higher. If though the 20 day SMA falls back, stocks will also pullback. Often readings this high in the Rate Of Change are followed by pullbacks.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is down to neutral and it is extremely 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 down to neutral for stocks and is extremely overbought.
Market Direction Outlook And Strategy for Nov 13 2014
The outlook for Thursday is for stocks to continue with a bias to the upside. Technically while the market has been drifting primarily sideways, the indicators are reflecting the possibility of the markets moving higher shortly. We could see that happen as early as Thursday or Friday.
We could see some weakness in the morning but then I am expecting a positive close.
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