Friday saw oil rise which assisted the energy sector but also saw hints that inflation may be picking up. Equities spent much of the day fighting sellers as an initial opening above 1960 brought out sellers who pushed the S&P back to close below 1950. Only the NASDAQ managed to hold onto a gain on Friday.
Index Closing Prices
The indexes closed near their lows. The S&P closed at 1,948.05 down 3.65. The Dow Jones closed at 16,639.97 down 57.32. The NASDAQ closed at 4,590.47 up 8.27..
Advance Decline Numbers
Volume rose to 4.35 billion on Friday. By the close 63% of all trades were moving higher and 60% of all stocks on New York were rising. There were 52 new highs and 27 new lows.
The NASDAQ saw 1.82 billion shares traded which is average. 58% of all volume was being traded to the upside. There were 48 new lows and 42 new highs.
Market Direction Technical Indicators At The Close
Stock Chart Comments:
The S&P closed above the 50 day simple moving average (SMA) for the second time since Dec 29. The Upper Bollinger Band has crossed up and over the 100 day moving average which is an up signal for the market. The 20 day moving average is continuing to rise. The 200 and 100 day moving averages are still leading the market. The drop on Friday did not do technical damage to the uptrend but the closing candlestick is not bullish for the market for Monday.
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 support as is 1920. 1900 is more symbolic than anything else.
1870 is support. 1840 continues to be support. The 1820 level is light support. 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 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 positive is continuing to rise sharply. It is now the strongest positive momentum since the October 2015 rally.
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 buy signal Feb 16 which is not yet losing strength but no longer gaining strength. It remains almost unchanged from 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 positive and rising but is strongly overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but continues to move sideways which is signaling no real change in direction is expected.
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 pointing up for stocks. It is overbought and could change to a down signal with a negative close on Monday.
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 pointing down for stocks. It is overbought.
Market Direction Outlook for Feb 29 2016
The slight pullback in the face of selling was not unexpected on Friday. The market has made large gains since falling into correction territory and on Feb 11 reaching 1810.10 which sent signs of a possible bear market through nervous investors. But now the market must push higher or risk giving back the recent gains. The final day of February has been negative more often than positive but as long as the market holds the 1940 level, the upturn remains intact.
Investors were disturbed on Friday by signs that inflation is actually gaining some momentum which may mean the rate increase in March may be back on the table.
For Monday then, the odds look stacked a bit against much of an advance but perhaps the focus should be on the market holding onto gains rather than making too many more on Monday.
The technical indicators are 5 to 1 positive for Monday but 3 of the 6 are signaling strongly overbought. Any advance on Monday looks to be slight.
The outlook for Monday then is a sideways trend with a bias toward weakness but not necessarily much of a drop lower.
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