The outlook for Wednesday Nov 19 2014 was for the market to move higher, even if only slightly. Instead it was specific stocks that produced the best results with stocks like Target and Walmart moving higher amid investor enthusiasm for retail ahead of Christmas buying season. Overall though the day was flat.
SPX Intraday Market Direction for Nov 19 2014
The one minute intraday chart below shows the day’s activity. The day started with an immediate drop which basically continued until 11:00 AM. From there a rally back pushed the market to the 2:00 PM Fed minutes release. The initial enthusiasm over the Fed minutes spiked the market but then quickly reality of interest rates coming perhaps sooner than expected drop the S&P back. The close was non-conclusive as investors remained indecisive on which way the Fed comments might sway the market direction.
SPX intraday for Nov 19 2014
Advance Declines For Nov 19 2014
Volume was virtually unchanged from Tuesday with volume of 3.4 billion shares traded. Up volume though fell dramatically with just 38% of volume up and down volume came in at 61%. New highs plunged by more than 50% to just 58 and new lows edged up to 57. The sideways action we have seen for last week and the start of this week is ending. Yesterday investors pushed the market up ahead of the Fed minutes and Japan’s decision not to raise the sales tax. Today investors remain uncommitted but the market did not fall. The problem is the number of new highs was poor and up volume was cut by more than half. A lot of investors were taking profits today.
Market Direction Closings For Nov 19 2014
The S&P closed at 2048.72 down 3.08. The Dow closed at 17,685.73 down 2.09. The NASDAQ closed at 4675.71 down 26.73.
Market Direction Technical Indicators At The Close of Nov 19 2014
Let’s review the market direction technical indicators at the close of Nov 19 2014 on the S&P 500 and view the market direction outlook for Nov 20 2014.
Market Direction Technical Analysis for Nov 19 2014
Stock Chart Comments: The chart tonight shows the S&P almost unchanged from yesterday. The Bollinger Bands Squeeze continues to form but the 20 day simple moving average (SMA) is pushing still higher and with the S&P entering the squeeze above the 20 day, there is a good chance of a further push higher later this week. First line of support is still at 2000. We need to see the Upper Bollinger Band move higher into the squeeze though otherwise it will signal a change down for the trend.
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 no longer looks like it is consolidating. A move either up or down is rapidly coming.
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 moved slightly lower 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 buy signal on October 22. MACD is no longer gaining strength and is starting to indicate a possible change in the divergences. It is nearing a sell signal if the market direction does not pick up and move higher within a day or two.
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 has turned back up. This often signifies a new change in trend is coming. That change cane be either up or down but if the Rate Of Change is still higher tomorrow then the trend change is underway.
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 as well for stocks and is also extremely overbought.
Market Direction Outlook And Strategy for Nov 20 2014
The biggest problem now facing the S&P is the Upper Bollinger Band is starting to fall back toward the candlesticks rather than the candlesticks moving higher. Often this is followed by a move lower for stocks especially if the Upper Bollinger Band commencing the start of the Bollinger Bands Squeeze.
The Fed minutes caught investors by surprise. The mood is bullish but the Fed minutes are showing investors that the game of endless money and zero interest rates will end. There are many investors who still believe the economy is poor and not really growing, but this is not the case. The Fed minutes point to the tightening labor market and the decline in the non-participation rate. People are finding jobs and companies are not letting go. Many investors still talk about how banks are not lending to businesses or consumers, the home renovation market is terrible, etc., etc. We have heard all of this before but the stats are not showing this. This is rhetoric that has been thrown around since 2009. These analysts are not following the ongoing stats. Banks are lending to businesses and qualified home owners. Lowes earnings as well as Home Depot show that the home renovation market is alive and growing. Car sales have been extremely hot. Businesses are sitting on a mountain of cash and are not laying off. Indeed they are now having trouble finding qualified workers for specialty type and technical specialists jobs. The next thing to watch for is strikes for wage raises or wage gains themselves. This is something the economy has not experienced for some time and is another sign the Fed will watch to determine if inflation will appear and/or whether interest rates should be raised. While the economy is not booming, it is however expanding and it is doing better than other parts of the globe.
For Thursday the market looks indecisive but today’s action was not bearish. Instead it was simply confused or confounded investors. Tomorrow stocks may attempt a recovery in the morning, but then pullback as investors continue to discern the Fed minutes. The gains if any should be small tomorrow. I am expecting a slightly lower or higher close but nothing dramatic. either way. Basically a see-saw day.
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