The outlook for Friday following Thursday’s big give back rally, was for stocks to attempt to retake 2000 and fail. I then had expected we would start this shortened week with the market direction moving lower. Instead the actions by the European Central Bank to commence their own version of Quantitative Easing turned investors around. The ECB plan also stabilized the price of oil for Friday and a rally ensued which ended with the S&P up over 1%, the Dow up over 1% and the NASDAQ up over 1.3%.
Advance Decline for Jan 16 2015
Volume was decent on Friday coming in just slightly more than 4 billion shares. 87% of all volume was to the upside which showed the strength of the rally back up. 207 stocks set new 52 week highs which for the first time in days was the highest showing for stocks. 200 is the “magic” number investors need to see to show that a sustained rally might be able to start. 250 new highs is of course better but what we want to see now is steadily increasing new highs. New lows fell back but were still fairly hefty at 94.
Market Direction Closings For Jan 16 2015
The S&P closed at 2019.42 up 26.75. The Dow closed at 17,511.57 up 190.86. The NASDAQ closed at 4,634.38 up 63.56..
Market Direction Technical Indicators At The Close of Jan 16 2015
Let’s review the market direction technical indicators at the close of Jan 16 2015 on the S&P 500 and view the market direction outlook for Jan 20 2015.
Market Direction Technical Analysis for Jan 16 2015
Stock Chart Comments:
The S&P pushed back above the 2000 level on Friday and then moved to try to take the 2020 level. The close was bullish with stocks back above the 100 day exponential moving average (EMA). Meanwhile the 20 day simple moving average (SMA) is still trending on top of the 50 day simple moving average (SMA) but is giving indications it may push higher and away from the 50 day.
The Lower Bollinger Band is back rising and the 200 day exponential moving average (EMA) is below the Lower Bollinger Band. All these signals are pointing to a probable recovery in the SPX and the 2000 level holding yet again.
Support Levels:
These are the present support levels.
2075 was light support. Below that was 2050 which was also light support. Stronger support is at 2000 which on Friday was recovered and again held the market up. Weak support is down at 1970. Stronger support is then at 1956 which should delay a further pullback 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 and rising.
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 readings are back rising.
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 and rising.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is trending back to neutral which may signal that the uptrend could be in jeopardy. I think this is unlikely but it needs to be watched to confirm a move back to up.
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 down. It is oversold and you can see that there is an upturn in the stochastic indicator..
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 down for stocks as well. It too is oversold and as well, while still negative for stocks it took is showing an upturn for stocks which could issue a buy signal as early as Tuesday..
Market Direction Outlook and Strategy for Jan 20 2015
Monday was a holiday. Tuesday looks stronger following Friday’s rebound and the close back above the 100 day exponential moving average (EMA). While I was looking for stocks to move down to the 200 day exponential moving average (EMA) which is around the 1970 level, it would appear that stocks are going to turn around. Much of the turn around can be attributed to the ECB Quantitative Easing plans. If it works, it should create some inflation in Europe and that would be good for the economy and stocks in general.
For Tuesday I am looking for stocks to move higher.
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