The outlook for Tuesday was for stocks to move higher after Monday’s holiday. Instead stocks plunged in the morning but as explained in the morning intraday chart analysis, volume was poor and signs pointed to a recovery in the afternoon. Indeed stocks worked their way back and closed up slightly on the day.
Advance Decline for Jan 20 2015
Volume today was still quite respectable with almost 4 billion shares traded. New highs slipped though, falling from 250 new highs on Friday to 202 today. Meanwhile new lows rose slight from 94 to 104. Up volume was just 40% of all shares traded while down volume made up 60%. Overall then while the new highs look somewhat promising at 200, you can see the problem facing investors who are bullish. A lot of investors are not as bullish as they would like. Tuesday was probably a draw between the bulls and bears but it certainly looked like it favored the bears for a while.
Market Direction Closings For Jan 20 2015
The S&P closed at 2022.25 up 3.13. The Dow closed at 17,515.23 up 3.66. The NASDAQ closed at 4,654.85 up 20.46..
Market Direction Technical Indicators At The Close of Jan 20 2015
Let’s review the market direction technical indicators at the close of Jan 20 2015 on the S&P 500 and view the market direction outlook for Jan 21 2015.
Market Direction Technical Analysis for Jan 20 2015
Stock Chart Comments:
The S&P looked poor in the morning dropping to the 2004 level before recovering back above the 2020 level. Stocks managed to close back above the 100 day exponential moving average (EMA) but overall the day looked poor for the bullish side of the market. The day ended with a doji-cross candlestick is is notorious for signaling a negative day will follow shortly.
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.
Overall the S&P is still above the 200 day moving average and as such I am placing small amounts of capital into positions.
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 neutral at the close.
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 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 positive.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is trending lower which may signal that the uptrend could be in jeopardy. On Friday I felt that the uptrend had more potential but the rate of change is in disagreement. It is probably more right than I am.
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 back to up although it is a somewhat weak signal.
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 a weak up signal.
Market Direction Outlook and Strategy for Jan 21 2015
Overall I thought Tuesday would be a stronger day for stocks. Instead at one point it looked like the Dow was going to give back the entire rally from Friday! While that did not happen, the market volatility continues to rattle most investors. At the close today there are signals for both up and down. The doji-cross candlestick at the close was not great to see. In 2014 it was almost always followed by a down day within a day or two.
Meanwhile the indicators that are pointing higher like the two stochastic indicators are weak in their up signals. Still I am going to go with the technical indicators which are pointing to a possibly higher day on Wednesday. Not much of a higher day, but a higher day by the close. The morning though could see weakness again.
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