The outlook for Thursday was for stocks to pullback in the morning after two days of rallying and then move higher into the close. Stocks instead were caught by a combination of good unemployment numbers but poor wages gains, terrorist attacks in France and a rising US dollar and declining oil prices.
Unemployment Numbers
The October and November employment numbers were raised higher on Friday and December’s numbers beat estimates with a gain on 252,000 more jobs. This pushed the jobless rate down to 5.6 percent from 5.8 percent but investors focused on the wage gains which moved lower. This caught many investors by surprise and sentiment turned down on Friday.
Advance Decline for Jan 9 2015
Volume on Friday fell back to 3.4 billion shares with 69% of that volume headed to the downside. There were 152 new highs and 63 new lows.
The new highs are not enough to push the market up. We need news highs in the range above 200 to boost momentum to move stocks solidly higher.
Market Direction Closings For Jan 9 2015
The S&P closed at 2,044.81 down 17.33. The Dow closed at 17,737.37 down 170.50. The NASDAQ closed at 4,704.07 down 32.12
Market Direction Technical Indicators At The Close of Jan 9 2015
Let’s review the market direction technical indicators at the close of Jan 9 2015 on the S&P 500 and view the market direction outlook for Jan 12 2015.
Market Direction Technical Analysis for Jan 9 2015
Stock Chart Comments: Stocks on Friday moved back lower but still closed above the 50 day simple moving average (SMA). The 20 day SMA is now down to the 50 day SMA. We will have to keep an eye to see if the 20 day falls below it.
The 2050 level was lost on Friday as stocks closed back below it.
Support Levels:
These are the present support levels.
2075 was very light support and broke easily in the recent downturn. Below that was 2050 which was light support and is now resistance. Stronger support is at 2000 which could delay a fall perhaps a day or two at the most and weak support is found at 1970. Stronger support is then at 1956 which should delay a further pullback again by at least a day.
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 this time.
Momentum: For Momentum I am using the 10 period. Momentum is negative.
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 Jan 5. MACD continues to be negative but the sell signal is weakening.
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 negative but trying to rise.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is showing that the trend is changing back to up. This signal did not change on Friday.
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 market direction is up.
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 signaling up for stocks and on Thursday issued a strong buy signal.
Market Direction Outlook and Strategy for Jan 12 2015
Technically the indicators are split with 3 now pointing higher and 3 pointing lower. MACD is probably worth watching on Monday. It is signaling down for stocks and not supporting the current rally. This would indicate that the rally is suspect, and investors should stay clear. We should have a better idea on Monday after the close.
The 2050 level is back in play with stocks trending around it on Friday. The move lower on Friday could be nervousness among investors. For Monday though stocks are almost evenly split between up and down. My personal outlook is for stocks to move higher. However the technical indicators are signaling sideways with a slight bias to the downside.
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