The market direction Monday was for stocks to move higher and the Santa Claus rally to begin. This phenomena is documented by the Stock Traders Almanac and historically the rally gains 1.6% over the final 3 days of the year and first two day of the new year. Since 1969 the Santa Claus rally has rarely not occurred. When it does not occur it has almost always been followed by a bear market. One of the worst was 1999 when in January 2000 the Dow collapses 37.8% over a 33 month period lasting until October 2002.
No Santa Claus Rally in 2007
In 2007 the third worst reading since 1950 was recorded when the S&P 500 fell 1.9% from Dec 27 2007 to Jan 3 2008. In 2008 stocks collapsed and finally found a bottom in March 2009.
This year stocks looked ready to rally. Let’s review today’s market direction action.
Market Direction S&P 500 Intraday For Dec 23 2013
Today’s market direction opened with a quick bounce. A morning low was put in by 10:00 AM and the market rallied into the lunch hour. By 2:00 PM the market had pulled back and made a higher low and then moved higher into the closing. The close was pretty well at the morning bounce high.
Advance Declines For Dec 23 2013
69% of stocks advanced Monday with 29% declining. New highs push up to 346 and new lows fell to just 86. The growing trend of new highs is a good signal that stocks are poised to move still higher.
Market Direction Closings For Dec 23 2013
The S&P closed at 1827.99 up 9.67 for another new closing high. The Dow closed at 16,294.61 up 73.47 and another new closing high as well. The NASDAQ closed at 4148.90 up 44.16 and continues to make new 13 year highs.
The IWM ETF closed at 114.78 up 1.29 and setting another new intraday high at 114.82.
Market Direction Technical Indicators At The Close of Dec 23 2013
Let’s review the market direction technical indicators at the close of Dec 23 2013 on the S&P 500 and view the market direction outlook for Dec 24 2013.
The most important support line in the S&P 500 at this time remains at 1750. That support line is holding the market direction up at present and that has not changed. The second support level of 1780 is very light support and there is new support now found at 1800. While this support is no stronger than support at 1780 it still is reasonable to expect that any pull back may stall for a day at the 1800 level. It is a good sign to see another support level in the S&P at the present time in the rally.
For Momentum I am using the 10 period. Momentum has been the best indicator during this recent correction. Momentum is positive and has turned back up.
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 today, Dec 23. We will need to see confirmation of the buy signal tomorrow, but the signal looks good and is reasonably strong at 1.24.
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 overbought for the fourth trading day.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the fourth day and continues to show strength.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic issued a buy signal on Wednesday and is still indicating that more upside lies ahead for this week. The Slow Stochastic is overbought.
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. On Wednesday last week the Fast Stochastic issued a buy signal. It is now overbought but continues to point to a higher day on Tuesday.
Market Direction Outlook And Strategy for Dec 24 2013
Tomorrow is a short day as the market prepares for Christmas Eve. The markets will close at 1:00 PM and will be closed on Dec 25. They will reopen on Dec 26 but I am expecting light volume on December 26.
The biggest event today was the buy signal from MACD. This supports all the other signals from the market direction technical indicators. FullyInformed members who are following the market direction portfolio may want to review today’s comments at the close of trading today. I adjusted all my stops on the portfolio today.
For tomorrow I am expecting a somewhat quiet day but more upside still for stocks and a another positive close.
Merry Christmas!
I want to wish all investors a very Merry Christmas. May you take time to reflect on the past year and enjoy the love of family and friends. Take time out to reflect on the goodness of the world we are fortunate to live in. My most sincere, warm and heartfelt wishes for a lovely Christmas.
Take care and have a very Merry Christmas.
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