Market Direction Outlook For Aug 29 2014 – Last Trading Day of August

The market direction outlook for Thursday was for stocks to move lower. Aside from profit-taking, the bigger catalyst was the continuing crisis in Ukraine. Meanwhile data indicated that the latest revision to the GDP shows growth at 4.2 percent a rise of two tenths of a percent over the original release. These types of numbers continue to show growth in the US economy but at the same time bring once again to question when interest rates might rise. This also weighed on stocks today.

SPX Market Direction Intraday One Minute Chart

The opening saw the market collapse almost 10 points on the news of Russian troops in the Ukraine. That marked the low for the entire day. Investors jumped in and immediately were back buying the dip and pushing stocks up to 1998, almost a full recovery. The afternoon saw little activity as stocks trended sideways and then dipped just slightly into the close.

SPX market direction intraday for Aug 28 14

SPX market direction intraday for Aug 28 14

Advance Declines For August 28 2014

Volume today continued to be low with just 2.3 billion shares traded. 60% of all volume was down and 55% of all stocks were declining yet only 11 new lows were made and there were 110 new highs. All the advance decline indicators point to the market simply consolidating and experiencing profit-taking and not much else. The advance declines numbers show little to be concerned about.

Market Direction Closings For August 28 2014

The S&P closed at 1996.7 down 3.38.  The Dow closed at 17,079.57 down 42.44.   The NASDAQ closed at 4557.69 down 11.93.

The Russell 2000 IWM ETF fell 60 cents to close at 115.91.

Market Direction Technical Indicators At The Close of August 28 2014

Let’s review the market direction technical indicators at the close of August 28 2014 on the S&P 500 and view the market direction outlook for August 29 2014.

Market Direction Technical Analysis for Aug 29 2014

Market Direction Technical Analysis for Aug 29 2014

Stock Chart Comments: The most important aspect of the present market is still the 1975 level. Profit-taking continued today and the early morning pullback on the news of Russian troops inside Ukraine was quickly bought by investors. This continues to show strength in the market.

1975, 1956 Support: Both are light support and both may be tested in coming days but for the time being stocks look set to continue to move higher. 1975 is the more significant valuation at this point.

Strong Support Levels are at 1870 and 1840 (no longer shown). At present I am not expecting any break of either of these levels.

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 12.7% 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 as there are no signs of any impending correction of that magnitude.

Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is positive and moved lower.

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 buy signal on Friday August 15. MACD remains positive but the readings are pulling back a bit.

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 no longer heavily overbought but is back trending sideways not down.

Rate of Change: Rate Of Change is set for a 21 period. Today the Rate Of Change pushed higher with a reading of 1.53. This indicates that in the profit-taking today new money was coming into stocks and buyers were interested in picking up shares despite the market being at 2000. Today the Rate Of Change indicator jumped higher indicating that some fresh capital was being applied today probably due to the pullback in the early morning.

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 down but almost neutral. It is still 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 signaling down for stocks and it too is overbought.

Market Direction Outlook And Strategy for August 29 2014

Friday marks the final trading day of August. As well it is ahead of the long weekend. With low volume and investors probably reluctant to take on new positions over the weekend, stocks are probably set to stay sideways but with a down bias.

That said, the rate of change finally spiked up which could indicate that stocks are going to bounce back. Problem here though is that the spike in the Rate Of Change could easily be caused by the early morning drop being bought up quickly by investors. Often that will get a spike out of the Rate Of Change.

Looking at the technical indicators, most of the positive indicators are pulling back. The negative indicators are remaining negative, but with  to one still positive, the chance of much downside is limited. For Friday watch for stocks to stay more sideways but we could see an effort in the afternoon to close up positive, even if only slightly. This will mark the end of another successful August for stocks.

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