The market direction outlook for the S&P for Monday Apr 20 was for a bounce attempt and then more weakness. The anticipated close for today was for either a small gain or small loss but nothing like we saw on Friday. Instead the opening saw the S&P push to 2100 by 10:00. From there is market drifted until it closed at 2100.40 which basically was where it was at 10:00. Once again the morning was all the action in the index.
Chinese Free Money
The biggest catalyst to the upside was the news from the Chinese government of further stimulus to try to assist a slowing economy. The market loves free money. The more the better. Just a few months ago China was clamping down on margin use citing growing risk as a concern. That mood had altered as China’s central bank cut their rate for the second time in two months and reduced the amount of cash banks require in reserve. This will spur more lending and more money for everything including Chinese and foreign stocks.
This continues the tradition of markets not being allowed to fall and the bears were unable to get anything going. With governments in Europe, North America, Japan and China working to keep a “put” under markets, its hard to fight against the thinking that dips are meant to be bought and rallies are for selling into. While the indexes are not doing anything as far as returns are concerned, many investors are enjoying substantial gains by basically trading dips and rallies. My own portfolio is up 14% so far this year. It could be on track for 30% to 40% this year depending on whether the market just continues to drift sideways with dips and rallies. Not a bad return for a sideways market.
Advance Decline for Apr 20 2015
Volume just managed to reach 3 billion shares by the close. The low volume is indicative of a market filled with investors who remember the last big bounce which was given back the very next day. Many are waiting to see what Tuesday and Wednesday bring.
By the close 64% of volume was moving up and 34% was moving lower. Shares moving higher though were better than 2 to 1 but once again new highs were just 50 and new lows only 13. So in general it was a good day advance decline wise, but nothing that would suggest selling is over and the market will move higher throughout the rest of the week. For that to happen, we have to see Tuesday’s numbers.
Market Direction Closings For Apr 20 2015
The S&P closed at 2100.40 up 19.22. The Dow closed at 18,034.93 up 208.63. The NASDAQ closed at 4994.60 up 62.79.
Market Direction Technical Indicators At The Close of Apr 20 2015
Let’s review the market direction technical indicators at the close of Apr 20 2015 on the S&P 500 and view the market direction outlook for Apr 21 2015.
SPX Market Direction Technical Analysis for Apr 20 15
Stock Chart Comments:
Last Thursday saw a doji-cross candlestick. Normally this is a bearish signal for one to two days. Friday’s decline being followed by Monday’s advance could set up the market for some weakness on Tuesday which would end the doji-cross signal.
Meanwhile the 20 day simple moving average (SMA) has now crossed down and over the 50 day simple moving average (SMA) which is a sell signal. What is interesting though is the number of investors who moved back into the market, even short-term, after the S&P hit 2075 on Friday and then bounced back.
The rally today has the &P back at the 2100 level. This level has been resistance for sometime and keeps rejecting the market.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. Stocks will have to stay above it to change it back to support.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is at 1956.
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.
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 from the most recent high. 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 am using the 10 period. Momentum is positive but instead of rallying today it moved sideways.
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 Apr 9 and that signal declined on Friday but turned sideways on Monday.
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 once again and moving higher.
Rate of Change: Rate Of Change is set for a 21 period. On Friday the rate of change was signaling lower for stocks. Today it turned up but the down signal remains. Stocks need to see a higher rise in the rate of change to signal that the down signal was incorrect on Friday. Right now the signal remains suspect of the rally on Monday.
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 down for stocks for the next couple of days..
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 and is possible ready to issue a buy signal.
Market Direction Outlook for Apr 21 2015
The big bounce seemed to occur off the 2075 level from Friday. Friday’s bounce in the afternoon, while small, still did seem to test support at 2075 and a lot of investors appear convinced that the 2075 level will hold for now. This brought more buyers into the market today.
But the technical indicators while mixed, remain biased toward more downside action than upside. The market will have to move higher on Tuesday which would mean a follow through action after a big rally. This is something the markets have not been able to muster since the start of the year.
Caution is advised as stocks have to prove they can hold the 2100 level and move consistently and convincingly higher.
For Tuesday, stocks look like they may try to rally at the start but then move lower into the lunch hour. The close may surprise either way but in general the technical indicators are biased more to the downside. It should be an interesting day on Tuesday.
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