The outlook for Monday was for stocks to move sideways with a lower bias, but for the rally to remain intact. With the Columbus Day holiday, volumes were light and the bond market was closed. This kept a lid on stocks which still managed a slight positive close by the end of the day.
Market Direction Closings For Oct 12 2015
Markets closed off their highs again on Monday. The S&P closed at 2017.46 up 2.57. The DOW closed at 17,131.86 up 47.37. The NASDAQ closed at 4,838.64 up 8.17.
Advance Decline Numbers for Oct 12 2015
Volume on Monday fell by 900 million shares to 2.87 billion. Trading was slanted to the downside with 62% of all volume traded lower and 37% traded higher. There were 53 new highs and 12 new lows. The new highs and lows were once again unchanged from Friday. For the market to move higher the new lows have to start picking up on Tuesday.
Market Direction Technical Indicators At The Close of Oct 12 2015
Market Direction Technical Analysis for Oct 12 2015
Stock Chart Comments:
Very little changes were seen on Monday. The advance stalled again as investors held back awaiting the bond market which often leads stocks one way or the other. Lows volumes also kept stocks in a tight range on Monday. The S&P index closed just below the 100 day moving average again and above the 50 day for the third day. The Upper Bollinger Band continues to move higher which often indicates there is more upside ahead. The closing candlestick though is a doji-cross or a star-cross for a second day which often indicates a change for the following day.
The 20 day simple moving average (SMA) is turning back up. The 200 day is still leading the market followed by the 100 day and 50 day but that could change shortly if the rally continues. The 50 day is turning higher. The Index closed below 2020 again but above 2010. It is important for the S&P to break the 2020 level by Tuesday and close above it. 2000 at this point remains the most important support level and up until August, it had held the market up against all dips.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 was light support. Below that was 2050 which was also was light support. Stronger support is at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support. 1920 is now light support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August.
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 of 384.72 points or 18% from the all-time high of 2134.72. This would be the biggest correction since April 2012. 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 is positive and rising sharply on Monday.
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 Friday Oct 2. That signal continues 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 overbought for the fifth day.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and but starting to turn lower.
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 pointing up for stocks and is very overbought. It is near a sell signal if stocks fail to move higher on Tuesday.
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 pointing up for stocks, is overbought and turning sideways which could indicate a possible sell signal by Tuesday if stocks do not move higher..
Market Direction Outlook for Oct 13 2015
For Tuesday stocks look set to try to break and hold above the 2020 level. Today was all about low volume and no conviction with the bond market closed. Tuesday though, stocks must move above 2020. With all the technical indicators positive but three showing strong overbought signals, the outlook is for stocks to move lower in the morning and possibly through the lunch hour. If however the 2010 level holds, stocks should move back positive into the afternoon and close.
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