The outlook for Monday was for the rally to gain some steam as investors anticipate the start of the so-called Santa Claus Rally. Stocks moved higher throughout the day with the Dow leading the way up 0.87% as it rose 154.64 points to close at 17,959.44 ready to break to new all-time highs this week and into 18000.
Advance Decline for Dec 22 2014
Volume was very good today with 3.4 billion shares traded. 52% of all trades were higher while 47% were lower. The new highs came in at 187 and new lows just 27. While the issue strength to the upside was not as strong as expected considering the number of new highs, the strength in the index itself is enough to keep momentum to the upside.
Market Direction Closings For Dec 22 2014
The S&P closed at 2078.54 up 7.89. The Dow closed at 17,8959.44 up 154.64. The NASDAQ closed at 4781.42 up 16.04.
Market Direction Technical Indicators At The Close of Dec 22 2014
Let’s review the market direction technical indicators at the close of Dec 22 2014 on the S&P 500 and view the market direction outlook for Dec 23 2014.
Market Direction Technical Analysis for Dec 22 2014
Stock Chart Comments: Stocks rallied still further today moving ahead of the support zone at 2050. There is very light support at 2075 which the SPX moved above today. The 50 day is continuing to rise and move away from the 100 day exponential moving average (EMA) indicating there is still more room for the market to rise.
Support Levels:
2075 has very light support. Below 2050 is strong support at 2000 and weak support at 1970. Stronger support is then at 1956. 1870 and 1840 are both levels with strong enough support to delay the market falling.
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 at this point and it is not something I am anticipating at this time.
Momentum: For Momentum I am using the 10 period. Momentum is back positive today and continuing to rise.
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 weak buy signal today. The MACD histogram is now positive. The buy signal is very weak and must be confirmed by tomorrow’s action.
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 still rising.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is positive and continues to point to the market trend up as having strength although it is staying more sideways than up which could be a concern by next week. This needs to be watched to confirm that the rally this week is not going to evaporate by the first week of January 2015.
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 market direction is up 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 signaling a move up for stocks again on Tuesday.
Market Direction Outlook and Strategy for Dec 23 2014
The expected Santa Claus rally is underway perhaps a day earlier than usual but with this year have short weeks both this week and next, perhaps it is to be expected. The Dow moved strongly ahead of the other indexes. Investors were busy setting up positions today to take advantage of the anticipated gains over the Christmas period.
For tomorrow the only technical indicator of any concern is the Rate Of Change which is not falling but not climbing either. The sideways signals is a bit of a concern. I will re-evaluate it on Tuesday.
For Tuesday stocks are still not overbought and have room to push higher. The DOW should break 18000 either Tuesday or on the short Wednesday trading session. The SPX looks poised to break the most recent highs this week as well.
Tomorrow I am expecting a still higher close for the indexes. Santa is certainly in town.
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