The outlook for Thursday was for stocks to be mixed but keep an upward bias. Technically on Wednesday the Fast Stochastic was pointing to a down day for stocks which met my own personal outlook but the remaining technical indicators continued to point to higher prices. In the end the technical indicators were correct. A lot of the upside action on Thursday was caused by the rally back up in oil and mergers and acquisition talk including PFIZER’s decision to purchase Hospira Inc for $16 billion. This kind of activity cheers investors who believe it is a sign of confidence in the economy.
Advance Decline for Feb 5 2015
Volume was down a bit today from yesterday’s 4.1 billion to 3.8 billion. New highs were up slightly to 137 and new lows were almost unchanged from Wednesday at 20. The problem to watch is the new highs. We really need to see new highs back above 200 to really juice the momentum to keep stocks moving higher. 80% of volume today was up but a lot of that was in the afternoon. In the morning it was mixed.
Market Direction Closings For Feb 5 2015
The S&P closed at 2,062.52 up 21.01. The Dow closed at 17,884.88 up 211.86. The NASDAQ closed at 4765.10 up 48.39.
Market Direction Technical Indicators At The Close of Feb 5 2015
Let’s review the market direction technical indicators at the close of Feb 5 2015 on the S&P 500 and view the market direction outlook for Feb 6 2015.
SPX – Market Direction Technical Analysis for Feb 05 2015
Stock Chart Comments:
The S&P rally today moved back above the 2050 level and in the afternoon challenged the 2060 level and closed above it. This placed the index just above the 50 day simple moving average (SMA). The move higher over the past three days has extended the Upper Bollinger Band and ended the anticipated Bollinger Bands Squeeze.
Support and Resistance Levels:
These are the present support levels.
2075 was light support and is now resistance. Below that is 2050 which is support. Stronger support is at 2000 which has repeatedly held the market up throughout each recent pullback.
Weak support is at 1970. Stronger support is then at 1956.
1870 and 1840 are both levels with strong enough support to delay the market falling and should see a sideways action attempt while investors decide whether to sell or buy.
The other two support levels 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 the bottom line.
A break of 1750 would mark a severe correction 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 present.
Momentum: For Momentum I am using the 10 period. Momentum is negative at the close showing a lot of today’s rally did not have momentum behind it.
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 weak buy signal Feb 4 and confirmed it 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 and overbought.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is back positive but is not supporting the move higher. It is sitting sideways. Normally it should be slowly rising to confirm the rally. We are not seeing that happen. This has to be watched.
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 an up signal for stocks again for Friday and it is overbought.
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 also signaling up for stocks and it too is overbought.
Market Direction Outlook and Strategy for Feb 6 2015
Technically the indicators are 4 pointing higher, one negative and one sideways. In general then the market direction should move higher on Friday. Al lot of course depends on the jobs numbers. As long as they are above 230,000 the market should be fine. Below 200,000 it will sell lower. Normally the jobs numbers have been heavy days for volume so we will have to see what Friday brings. We will know before the markets open as the jobs numbers come out at 8:30. I would expect a much more moderate pace for stocks moving higher on Friday.
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)