Volume pulled back on the rally today which is never a great sign. Often when volume pulls back as the market moves higher, it is because a lot of investors got into the market on those days when volume was much higher, such as we saw yesterday. Then as the rally extends itself higher, volume dries up as investors who bought in earlier, wait to see how far the market will move up before they get out. This has been the pattern for decades and I doubt it will change. So today’s volume was good but the decline in the number of trades indicates that a lot of investors moved into stocks on Monday.
Advance Decline Numbers
Volume on Tuesday was 4.28 billion shares with 61% of the volume to the downside. New highs though came in at 79 while new lows fell back to 57.
On the NASDAQ volume was 2 billion shares a huge drop from Monday. 63% of all volume was to the upside. New highs came in at 111 while new lows rose to 59.
Market Direction Technical Indicators At The Close of Dec 1 2015
SPX Market Direction Technical Analysis for Dec 1 2015
Stock Chart Comments:
The S&P close on Tuesday was above all the major moving averages and back above 2100. The 50 day moving average is pushing toward the 200 day and if the upside can continue this week, we should see the 50 day move above both the 100 and 200 moving averages. This will be a major up signal when it happens.
The Lower Bollinger Band is still moving above the 50 day moving average and is nearing the 100 and 200 day moving average which is a bearish signal. At the same time a Bollinger Bands Squeeze is now underway which looks poised to send stocks higher.
The closing candlestick on Monday was bullish for Wednesday.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 is light support. Below that is 2050 which is light support. Stronger support is at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction. Stocks continue to have trouble holding the 2000 level.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support. 1920 is now light support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August.
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 of 384.72 points or 18% from the all-time high of 2134.72. 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 use a 10 period when studying market direction. Momentum is positive but not rising.
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 sell signal on Friday Nov 10. Despite today’s strong push higher, the sell signal remains in place. It is weak, but still in place.
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 rising. It is nearing overbought signals again on Tuesday.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and signaling higher.
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 signaling up for stocks although the signal up is in jeopardy of changing to down at any time. It is very 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 sharply higher for Wednesday despite nearing overbought signals..
Market Direction Outlook for Dec 2 2015
History repeated itself again this year as the first trading day of December has been higher the majority of the time over the past 27 years. This year has now been added to that history.
The technical indicators are now 5 positive and just 1 negative. This gives us an up signal. Unfortunately Fed Chair Janet Yellen is speaking Wednesday and again on Thursday. That is bound to keep the market in check unless there are strong hints regarding the next interest rate increase and whether it will happen in December. After her comes the nonfarm payroll numbers on Friday.
Therefore, for Wednesday I am expecting a bit of a sideways market ahead of Yellen but the bias is definitely to the upside.
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