Perhaps the biggest event on Wednesday Feb 3 was a pullback in the US dollar. This pushed oil prices higher despite a report showing oil supplies at their highest levels since 1930. The decline also pushed commodity prices higher which turned what was a down day into an upday.
Index Closing Prices
All the indexes closed near their lows for the day. The S&P closed at 1,912.53 up 9.50. The Dow Jones closed at 16,446.66 up 183.12. The NASDAQ closed at 4,504.24 down 12.71.
Advance Decline Numbers
Volume on Wednesday jumped in the afternoon moving the total for the day to 5.1 billion. By the close, 65% of all volume was moving to the upside. New lows came in at 227 but that was down from earlier in the day. New highs rose to 89.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Feb 3 2016
Stock Chart Comments:
The S&P closed near the day’s high and back at the 20 day simple moving average (SMA). During the day the market reached 1872.23 near the low of August’s correction and that also seemed to draw in some investors. The 50 day moving average is now below the 100 day. The 200 day moving average is leading the market. The Bollinger Bands Squeeze is now quickly forming and it’s a tough call whether the S&P will break to the upside or the downside. In general when you look at the index you can see that each of the last 3 days has seen a decline and a pattern of a lower high and lower low.
However the closing candlestick today is often bullish for the next day.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 2100 was light support. Stocks have been unable to stay above this level. It remains resistance.
2075 was light support and is also resistance. Below that is 2050 which was also light support and now 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 was light support and was retaken on Friday and reached again today. 1920 was light support and is back as resistance. 1900 is more symbolic than anything else.
1870 and 1840 have continued to support the market and the 1820 level is light support but again held up well in the sell-off of the last two weeks.
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 2011 plunge 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 is finished.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and pointing higher.
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 on Jan 28. The buy signal is poor at the close on Wednesday.
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 moving back toward overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative but rising. The reading at the close was negative 4.98 which is more negative the positive for stocks at this point.
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 down for stocks.
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 up for stocks for Thursday.
Market Direction Outlook for Feb 4 2016
Technically the S&P actually now has two negative indicators. All the other indicators are positive. The late afternoon rally had enough strength to probably carry it over to Thursday. Many of the indicators have not reacted fully to the afternoon rise in equities. We should see better technical readings, up or down, during the day on Thursday. For now though, the technicals support a move up by 3 to 2.
As well, Societe Generale explained today that Chinese travellers will make about 3.2 billion individual road trips over the next month as they mark the Chinese New Year holiday. It is the world’s largest human migration and Societe Generale indicates this will increase dramatically gasoline demand by China. That could assist pushing oil prices higher for the next several days which should translate short-term into higher equity prices, particularly for energy companies.
The outlook for Thursday then is for stocks to move higher.
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