Tuesday’s outlook was for stocks to move higher. At the start the market jumped higher on the news that the economy had grown by 5 percent, the fastest growth rate in more than a decade. This easily surpassed analyst estimates for a rate as high as 4.3 percent. The question on the minds of many analysts though was, where is inflation and will the economy start to see it shortly.
SPX Intraday for Dec 23 2014
Intraday you can see in the one minute chart the jump at the outset, a short pullback and then another rally higher into 10:00 AM. From there the Market Direction drifted lower until by around 10:40 it was sitting just below 2080 which ended up being the low for the day. Investors then bought the market and through the rest of the day pushed the S&P to a new all-time high before selling into the close, which is typical of new highs as investors take profits. The early morning rally was interesting as most analysts felt that the interest rate concerns from the Fed were on the back burner finally, after the Fed meeting last week.
Today’s big jump in economic growth though, may pave the way for inflation to pick up which investors by mid-morning, wondered if rates would possibly move higher as early as spring. This gave many investors “pause” for thought which saw the market by mid-morning pullback. That though simple came across to most investors as a buying opportunity and they then jumped in.
SPX intraday one minute chart for Dec 23 2014
Advance Decline for Dec 23 2014
Volume was still pretty decent at 3 billion shares considering it is two days to Christmas. 67% of all trades were higher. 286 new highs were made and just 25 new lows. The number of highs now reaching about 250 show the strength of the current rally.
Market Direction Closings For Dec 23 2014
The S&P closed at 2082.17 up 3.63. The Dow closed at 18,024.17 up 64.73. The NASDAQ closed at 4765.42 up 16.
Market Direction Technical Indicators At The Close of Dec 23 2014
Let’s review the market direction technical indicators at the close of Dec 23 2014 on the S&P 500 and view the market direction outlook for Dec 24 2014.
Market Direction Technical Analysis for Dec 23 2014
Stock Chart Comments: Stocks rallied still further today moving ahead of the support zone at 2050 and 2075 which is light support. The only concern at the close was the pullback of stocks into the close which set up a doji cross for Wednesday. While not a guarantee, often the doji cross indicates indecision on the part of investors and can signal a shift in outlook for a day or two. Therefore we could see a bit of weakness on Wednesday.
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 positive 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 Dec 22 which was confirmed today but the confirmation itself was not all that strong. I would like to see one more day’s confirmation on MACD.
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 as it reaches into overbought signals..
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is positive but is still trending sideways. This is showing a lack of conviction from investors and may be signaling that the trend up is running out of steam, as it were. The rate of change needs to be watched closely.
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 Wednesday and it is also overbought.
Market Direction Outlook and Strategy for Dec 24 2014
The Santa Claus rally continued on Tuesday and the S&P and DOW both set new highs again. It has been a nice recovery from the dip earlier this month. Wednesday is a short day as markets close at 1:00 on Christmas Eve. I am expecting lower volume and if the doji cross is correct, tomorrow we could see primarily sideways action.
The markets are then closed on Dec 25 and reopen on Boxing Day. If there is some sideways action on Wednesday morning it may open some further opportunities as I believe stocks will still move higher into next week as the so-called Santa Claus rally continues.
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