The outlook for stocks for Friday Dec 5 2014 was for stocks to remain mixed and the bias was neutral, which is neither up or down by much. I explained that the unemployment report might be the deciding factor. Stocks did bounce a bit on the unemployment report but in general it was a neutral sort of day. In the end the S&P was up by 3.45 points or 0.17% for a fairly neutral day.
Advance Declines For Dec 5 2014
Volume on Friday matched Thursday with 3.4 billion shares traded. Volume though was about as neutral as you can get with 49% of all volume rising and 50% falling. 51% of stocks were rising and 46% were falling. New highs came in at 186 and new lows rose a bit to 135. New lows are starting to keep pace with new highs. This is not overly bullish for stocks pushing higher. We need to see new lows fall back to 30 or lower.
Market Direction Closings For Dec 5 2014
The S&P closed at 2075.37 up 3.45. The Dow closed at 17,958.79 up 58.69 and nearing 18,000. The NASDAQ closed at 4780.76 up 11.32.
Market Direction Technical Indicators At The Close of Dec 5 2014
Let’s review the market direction technical indicators at the close of Dec 5 2014 on the S&P 500 and view the market direction outlook for Dec 8 2014.
Market Direction Technical Analysis for Dec 5 2014
Stock Chart Comments: The chart is almost unchanged from Thursday. The SPX continued to try to push the Upper Bollinger Band. The Bollinger Bands Squeeze continues to unfold and the 20 day simple moving average (SMA) continued to trend higher and is supporting stocks. The 50 day SMA is trending on top of the 100 day and could cross lower but is continuing to stay narrow but has not yet crossed over the 100 day.
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 falling slightly.
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. MACD continues negative.
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 remained positive today.
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 up.
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 is also overbought.
Market Direction Outlook and Strategy for Dec 8 2014
Technically for Monday Dec 8 the market is sitting pretty well where it was on Thursday. Stocks are still looking mixed. The technical indicators remain undecided as a group but individually there are still two pointing lower, two neutral and two pointing higher, a true mixed outlook.
The November unemployment report showed that the economy is continuing to generate significant job growth. Yet stocks failed to rally much on the news, perhaps fearing once again the chance of interest rates rising sooner rather than later. December though is among the more bullish months for stocks. There are two ways to look at the market here. The first being that the December effect is enough to move stocks higher and the Santa Claus rally at the end of the month should be enough to get stocks into higher territory.
The other alternative is that stocks are going to pullback as the Bollinger Bands Squeeze tightened. There are a lot of indicators that this neutral market will not last much longer. If that is the case then stocks will dip this week.
Overall my outlook for Monday remains mixed, but I would say the bias in my opinion is more to the downside. I remain cautious here and am taking on smaller positions and keeping cash at the ready in case stocks dip.
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