Thursday saw a mix of reports which pointed to the US economy slowing. The led to a decline in the US dollar for a fourth day which helped move most commodity prices higher although not oil which slipped to close at $31.72 despite being higher earlier in the day at $33.60.
The slide in the US dollar is assisting a lot of commodities as the dollar has tumbled 3 percent this week for the worst week since May 2009. This is also assisting the Toronto Stock Exchange to continue its rise.
Part of the reason for today’s volatility though is the jobs numbers which arrive tomorrow before markets open. Analysts are mixed on the expectations for January’s unemployment numbers.
Index Closing Prices
All the indexes managed small gains ahead of the unemployment numbers tomorrow. The S&P closed at 1915.45 up 2.92. The Dow Jones closed at 16,416.58 up 79.92. The NASDAQ closed at 4,509.56 up 5.32.
Advance Decline Numbers
Volume on Thursday rose to 5.2 billion. By the close, 69% of all volume was moving to the upside. New lows came in at just 69 a drop from 227 on Wednesday. New highs fell back to 54.
The higher volume today over yesterday also indicates a growing number of investors are taking profits as many are taking advantage of the decline in the US dollar to bail out of many commodity stocks that have recovered some lost ground, thanks to the fall of the US dollar this week.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Thursday Feb 4 2016
Stock Chart Comments:
The S&P closed just above the 20 day simple moving average (SMA). The 50 day is now falling away from the 100 day leaving the market with a strong sell signal as the 200 day leads the market presently. The Bollinger Bands Squeeze is continuing but a lot now depends on the unemployment report and how it will be received by investors.
The closing candlestick is mixed but in about 60% of the cases, today’s closing candlestick is bearish for the following day. The S&P rise above the 1927 level today but then fell back to close below it.
The day ended primarily sideways as you can see in the number of technical indicators that have turned sideways ahead of the unemployment numbers.
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 again at the close today.
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, overbought and moving sideways.
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 5.02 which is unchanged from yesterday, indicating another sideways signal.
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 Friday but it could easily turn down which would immediately generate a sell signal.
Market Direction Outlook for Feb 5 2016
Technically the S&P still has two negative indicators and 4 positive ones. The positive indicates are primarily flat but still show strength exists in stock at the present time.
Tomorrow the market direction depends on the unemployment number and how it will be handled by investors. With 4 positive signals and only 2 negative ones, the outlook is still quite uncertain due to the reaction on Friday morning once the unemployment number is released.
I can’t predict the jobs numbers although if the past 4 weeks is indicative of them, the jobs numbers should be good once again. For Friday then, it comes down to the unemployment numbers as tomorrow’s move up or down are dependent on them.
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)
Market Direction External Links
IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info