The market rally on Friday was sparked by oil trying to climb following more support for OPEC to try to engage all oil producers in an effort to stem to oversupply. Meanwhile stats from January showed retail sales increased again in January marking a third month of gains which brought hope to investors that the US consumer is spending the savings from low oil prices. Gold slipped on Friday and the indexes pushed higher for one of the better days this year.
Index Closing Prices
The indexes closed at their highs The S&P closed at 1,864.78 up 35.70. The Dow Jones closed at 15,973.84 up 313.66. The NASDAQ closed at 4,337.51 up 70.67.
Advance Decline Numbers
Volume on fell back to 4.7 billion shares. By the close, 82% of all volume was moving to the upside. 78% of all stocks on New York were rising. New lows fell back from 709 on Thursday to just 139 on Friday. New highs dropped from 37 to 23.
Market Direction Technical Indicators At The Close
Market Direction Technical Analysis for Feb 12 2016
Stock Chart Comments:
The S&P set a new 52 week low on Thursday. Often a new low in an oversold environment creates a snap-back rally which is what we saw on Friday. The move saw a close still below the 20 day simple moving average but volume was decent and the large number of stocks moving higher throughout the day and into the close should have enough strength for Tuesday’s open.
The Bollinger Bands Squeeze is ending with the S&P moving up and above the Lower Bollinger Band. Often this signals a move higher out of the squeeze.
All the major moving averages are still falling and the 50 day is falling quickly away from the 100 day signaling lower prices are still ahead.
The closing candlestick is often bullish but sometimes a bullish candlestick with the market closing at the high leads to a drop at the open on the following day.
The close of the S&P was above the 1850 level
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 2100 is resistance.
2075 was light support and is also resistance. Below that is 2050 which is also resistance.
Stronger support was at 2000 which is now resistance.
Weak resistance is at 1970 while stronger resistance is at 1956 and technically it is more important than 1970 for the market. 1940 is light resistance as is 1920. 1900 is more symbolic than anything else.
1870 is resistance. 1840 continues to be support. The 1820 level is light support but again held up well today. The strongest support level is at 1800.
1775 and 1750 are both 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 all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of 271 points for a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and falling.
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 Feb 10. The sell signal weakened on Friday and could easily turn to a buy signal if Tuesday has an advance.
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 rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and but rising which could signal a move higher for the market.
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 issued a buy signal at the close on Friday and is oversold.
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 issued a buys signal on Friday and is oversold.
Market Direction Outlook for Feb 16 2016
The technical indicators are now split with 3 indicators now positive and two of those three issuing buy signals. The other three technical indicators are negative but rising quickly.
We have seen these rallies fizzle out before but Tuesday’s rally has a new catalyst to the upside with the Chinese Central Bank pegging the Yuan. As well OPEC appears more ready to try to reduce oil output a move that Saudi Arabia and Russia may not agree to.
With Goldman announcing on Monday that they believe the current “credit crisis” is at an end and the investors should sell gold, that could be the final catalyst to push stocks to rally further on Tuesday. In their comments, Goldman analysts wrote “Systemic risks stemming from the collapse in oil and commodity prices are extremely small.” They also indicated that they believe US rates will still rise in 2016.
Historically the day after Presidents Day has been bearish far more often than bullish but with three catalysts to the upside and the global markets rallying on Monday while markets here were on holiday, stocks appear headed higher on Tuesday.
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