The market direction outlook for Thursday was for stocks to be a bit weak in the morning but not retest the 50 day simple moving average (SMA). A positive close was expected but nothing too overwhelming. Instead though earnings and announcements out of VISA pushed the market to the upside. This was followed by good news on the Weekly Initial Unemployment Insurance Claims which came in at 287,000 and news that the GDP was stronger than anticipated at 3.5 percent. However while investors fretted that this would mean more ammunition for the Federal Reserve to raise rates sooner, the numbers when broken down showed that the recovery remains uneven with businesses, investment in real estate and consumption by consumers all dropping from the previous quarter. Let’s take a look at today’s action.
SPX Market Direction Intraday for Oct 30 2014
You can see in the one minute intraday chart for the SPX below, that stocks hard a sharp opening bounce and then sold lower. This was anticipated in my market direction outlook from last night based purely on the previous close. The drop pushed stocks back below 1980 which sparked interest from investors who then bought selectively, pushing the SPX up to 1999.40 by 2:00 PM. The rise was steady but not all stocks were participating. It was a very uneven rally. The mid-afternoon saw some weakness with stocks back to 1990 and then a rally into the close ending the day at 1994.65. The SPX is back within striking distance of the old highs, a rather amazing accomplishment following the recent correction.
SPX market direction intraday for Oct 30 2014
Advance Declines For Oct 30 2014
Volume was reasonable but not exciting at 3.5 billion shares however the percentages show just how uneven the rally was. 40% of all volume was on declining shares and 58% on up volume. However new highs came in at 201, the highest number in at least two weeks if not longer. New lows rose as well though coming in at 69.
Market Direction Closings For Oct 30 2014
The S&P closed at 1994.65 up 12.35. The Dow closed at 117,195.42 up 221.11. The NASDAQ closed at 4566.14 up 16.91.
The Russell 2000 IWM ETF moved higher closing up 97 cents at $114.87.
Market Direction Technical Indicators At The Close of Oct 30 2014
Let’s review the market direction technical indicators at the close of Oct 30 2014 on the S&P 500 and view the market direction outlook for Oct 31 2014.
Market Direction Technical Analysis for Oct 30 2014
Stock Chart Comments: The SPX stayed negative for a while in the morning and then pushed higher moving within a few points of 2000. It stayed above the 50 day all day. The Upper Bollinger Band is turning back up so the likelihood of a Bollinger Bands Squeeze which I had been discussing, is gone. The 20 day simple moving average (SMA) is also starting to turn back up despite being below the 200 day exponential moving average (EMA).
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling. 1930 was given up yesterday. 1956 and 1970 are back as support for stocks.
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 and rising toward being 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 which was confirmed on the 23rd. 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 overbought.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change is staying positive and confirming the trend change to up.
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 up but is beginning to turn down. It could give a sell signal as early as tomorrow.
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 still signaling up and it too is very overbought.
Market Direction Outlook And Strategy for Oct 31 2014
The very last day of October is upon investors. November marks the start of the 6 best months of the year. Historically the first day of November has been bearish in 5 of the last 8 years. All the indicators are pointing to further advances except for the Slow Stochastic which is warning that a sell signal may be generated tomorrow, which would signal a sideways to down bias for stocks.
My outlook for Friday is for the rally to continue but at a slower pace. We should see some selling during the day but overall the trend remains higher even if it is somewhat subdued, especially after today’s big jump in the Dow.
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