Investors in general are a nervous bunch. They are optimistic but fear is always hanging around. On Monday investors fretted about the state of the global economy. They sold stocks with 4.1 billion shares being traded and 78% of all shares falling. New lows hit 231 as investors bailed on stocks.
Today sales numbers from the automakers jump started the day and stocks came roaring back with the Dow setting another new all-time record high and the S&P ready to set its own high shortly. What a difference a day can make.
SPX Intraday Market Direction for Dec 2 2014
Yesterday I talked about the importance of the 2050 support line. While not strong, it is still an important support level and if it is broken, stocks will quickly fall to 2000. Yesterday stocks tested the 2050 level and held above it. That set the stage for a recovery rally today. There were 4 rallies, each of which pushed the SPX higher. From 11:00 to 1:30 stocks trended sideways which then attracted more buyers who moved the SPX still higher until by 3:00 sellers emerged and gave the market a bit of a nudge lower. Still the day was positive with the SPX closing at 2066.55.
SPX Intraday for Dec 2 2014
Advance Declines For Dec 2 2014
Volume on Tuesday pulled back by 500 million to 3.6 billion shares. The big upturn though did not translate into the same view with 58% of shares being traded to the upside and 42% to the downside. New highs came in at 107 but new lows fell from 231 to 127..
Market Direction Closings For Dec 2 2014
The S&P closed at 2066.55 up 13.11 and wiping out almost all of yesterday’s 14.12 loss. The Dow closed at 17,879.55 up 102.75. The NASDAQ closed at 47255.81 up 28.46
Market Direction Technical Indicators At The Close of Dec 2 2014
Let’s review the market direction technical indicators at the close of Dec 2 2014 on the S&P 500 and view the market direction outlook for Dec 3 2014.
Market Direction Technical Analysis for Dec 2 2014
Stock Chart Comments: Stocks yesterday tested the 2050 level and then closed above it. Today they extended those gains and recovered almost all that was lost on Monday. But the 50 day simple moving average (SMA) continued to fall toward the 100 day EMA. The Middle Bollinger Band however is still supporting stocks and they are continuing to trade above the Middle Bollinger Band which is a bullish sign. .
The support level at 2050 is light support and will not delay a fall for more than a few hours. 2000 is the highest level of decent support at present and while not strong, it should have enough strength to hold sellers back for at least a day in the event of an interim pullback. If 2050 should break, stocks will collapse back to 2000 in very quick order. The next level after 2000 is at 1970 and then 1956.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling.
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 13% 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 moving sideways.
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 Dec 1. The sell signal was confirmed today by a lower reading.
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 has jumped back to positive.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is moving sideways and still indicating a change in the trend is underway.
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 down.
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 neutral for stocks and is also overbought.
Market Direction Outlook and Strategy for Dec 3 2014
Technically stocks are still looking weak but today’s up move does bode well for stocks to move higher, particularly due to the season stocks are entering which tends to be positive for stocks. The outlook for Wednesday is mixed but the bias is to the upside despite the sell signal confirmation from MACD.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)