The market direction outlook for Tuesday Apr 28 2015 had two different scenarios. The one scenario that appeared was a move below 2100 in the morning by 10:00 AM and then a recovery rally which lasted into the close. Much of the rally was a result of Apple earnings. Although the stock jumped at the outset and then moved lower by 1.86%, it was the earnings numbers themselves that assisted the S&P and DOW. Apple showed that growth is continuing within not just the US market but global markets as well. Their numbers were stunning and continue to confound analysts who are looking for Apple to trip on their growth going forward. So far that has not been the case. The other two companies that surprised to the upside was Merck and IBM. I do not trade in IBM but I do trade in Merck. Merck shares bounced 5.04% higher on exceptional quarterly numbers. All of this helped to propel both the S&P and Dow higher. Unfortunately the drop of Apple and late in the day the plunge of Twitter, hurt the NASDAQ which ended the day with a small loss of 4.82 points.
Advance Decline for Apr 28 2015
Volume continued to increase on Tuesday with 3.55 billion shares traded. 61% of all volume was to the upside and 38% was to the downside. While volume looked good the number of new highs was disconcerting with only 54 new highs, which marks a continuing drop in numbers and 14 new lows. The new lows still points to not a lot of concern for stocks pulling back but the new highs is disappointing. New highs of this number cannot sustain any type of rally.
Market Direction Closings For Apr 28 2015
The S&P closed at 2,114.76 up 5.84. The Dow closed at 18,110.14 up 72.17. The NASDAQ closed at 5055.42 down 4.82.
Market Direction Technical Indicators At The Close of Apr 28 2015
Let’s review the market direction technical indicators at the close of Apr 28 2015 on the S&P 500 and view the market direction outlook for Apr 29 2015.
Market Direction Technical Analysis for Apr 28 2015
Stock Chart Comments:
The S&P regained its footing on Tuesday and closed near the highs for the day but still closed below Friday’s close and Monday’s open. The 20 day SMA is now above the 50 day SMA but not by much and is not yet signaling that it will move higher, making the push higher by the 20 day SMA very suspect.
The dip below 2100 today was quickly bought by investors, but only by what appears to be traders and not longer-term investors. The number of new highs continues to drop which is a major concern.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
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 and still moving 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 moved lower on Tuesday.
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 back positive and took a sharp turn higher..
Rate of Change: Rate Of Change is set for a 21 period. The rate of change which just started to signal up for stocks stayed sideways today. While definitely not a signal down, it is bringing to question whether there is any up move left as the Rate Of Change refuses to budge. This could be the best indication that the rally just does not have enough momentum to actually set up new highs.
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 still pointing down for stocks and is 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 also continuing to point down for stocks and it too is overbought. By the close today though it was turning higher and another up day could see a buy signal generated.
Market Direction Outlook for Apr 29 2015
My outlook for Tuesday was for stocks to bounce at the open, sell lower and then recover into the afternoon. This happened but what is concerning is the poor showing for new highs. The market is drifting sideways more than it is moving higher or lower. This is creating an environment of declining 52 week highs and very low 52 week lows. At some point this will break.
The market today was affected almost exclusively by earnings. With the earnings from Apple, IBM, Merck and others, the decline in average earnings is now a slight positive beating the revenue numbers for the same quarter last year and once more setting up this past quarter as NOT as quarter for the first decline since 2009. With more companies still to report that number could change but so far things are looking up for revenue numbers.
Technically though the indicators are not impressed with the market action. The “sell the news” on Apple Stock hurt the NASDAQ and despite incredibly good numbers, investors were in a selling mood for Apple, but pushed Microsoft up 2.29% to close at $49.15 closing in on the 52 week high of $50.05. Technical indicators are heavily mixed with 2 indicators negative, one sideways, 2 positive but declining and 1 rebounding. That slants Wednesday to further gains although probably modestly.
We are getting into the end of the month. May looms large ahead. I would not expect a run-away rally by any stretch now. The mood is lightly bullish so we should see some kind of positive close, even a slight one, on Wednesday. The outlook for Wednesday is for stocks to move up “just a bit higher”.
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