With oil continuing its climb and closing at a two week high, investors took heart and instead of volume dropping off, more investors were busy trading as the Santa Claus Rally seems to have gotten underway.
The outlook was if stocks opened higher than Tuesday’s close the outlook was for the S&P to retake the 2050 level which it easily did.
Advance Decline Numbers
Volume on Wednesday was much higher than expected with 3.46 billion shares traded. 93% of all volume was to the upside, one of the strongest up days of the year. New lows plunged to just 19 and new highs reached 38. 85% of all stocks were rallying. The NASDAQ numbers were also strong with 1.56 billion shares traded and 76% of all trades to the upside. New lows were 56 and new highs 39. 69% of all NASDAQ stocks were moving higher. These numbers point to further advances for the indexes into the year end.
Market Indexes Closing Numbers
All indexes closed just off their highs again on Wednesday. The S&P closed at 2,064.29 up 25.32 and above the 2050 support level. The Dow Jones closed at 17,602.61 up 185.34. The NASDAQ closed at 5,045.93 up 44.82.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Thursday Dec 23 2015
Stock Chart Comments:
Wednesday saw a strong move for a third day. The SPX moved above the 20 day, 100 day and 200 day moving averages and closed at the 50 day moving average. It also closed above the important 2050 technical support level. The 100 day is still trading below the 200 day but the 50 day is still leading the market and it is turning higher. The 20 day simple moving average (SMA) is also starting to turn up and looks like it may not move below the 100 or 200 day moving averages which is bullish for stocks.
Support and Resistance Levels:
These are the present support and resistance levels. Almost since the start of this year, these support levels have not changed. That is unusual for the stock market and is the first time since I started investing in the early 1970’s that the same support levels have been referred to for an entire year.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 was light support. Below that is 2050 which was also 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 back positive on Wednesday and 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. The sell signal was weaker again on Wednesday and ready to issue a buy signal if the market moves higher again on Thursday.
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 negative and rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and rising.
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 which is a complete turn from yesterday’s down signal.
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 up for stocks and had issued a buy signal on Tuesday.
Market Direction Outlook for Dec 24 2015
Thursday is half a day of trading as Christmas Eve is upon us.
Technically the indicators are looking stronger and the Santa Claus rally looks like it will occur again this year. The market though has to retake 2076 which was the previous high from Dec 16 and Dec 17, otherwise this has just been a technical bounce. I am doubting this is just a bounce.
Thursday if stocks open lower than Wednesday’s close, look for sideways action and a slight bias lower. We could still see a positive close but volume will be low on Thursday so weakness could creep in.
With 3 technical indicators now pointing up and 3 still negative but rapidly climbing, I think Thursday could close slightly higher. Monday next week could start off slow but should continue to climb unless oil pulls back hard.
The Santa Claus Rally looks like it is underway. We will know more on Monday.
Merry Christmas to all investors. I will be posting randomly throughout the next few days as I take some time off to wrap a few gifts and do some cooking for the holidays. My very best and warmest wishes for a joyous Christmas season to you, your loved ones and your friends.
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