The outlook for Thursday was for stocks to continue the advance. The advance today was strong, built on the momentum from Wednesday’s rally and from the Fed and ECB both of which continue to give the market the idea that liquidity will be there whenever it is needed. The price of crude also rose slightly to close up just 14 cents, which certainly helped the energy sector. Investors are starting to understand that oil prices may not rebound quickly. Many investors are also beginning to feel that low oil prices might not be such a “bad” thing for the world’s economies, after all.
Unemployment Numbers
Friday we get the unemployment numbers. The outlook is for strong job growth. If that fails to materialize we could see a dip, but it will be short-lived at this point in the rally.
Advance Decline for Jan 8 2015
Volume was on Wednesday was 3.8 billion shares and today it was 3.9 billion. The rally is growing.
83% of all volume was to the upside but more important, new highs came in at 199 nearing that magical 20o to 250 mark which will build a stronger move up. New lows were at 33.
Market Direction Closings For Jan 8 2015
The S&P closed at 2062.14 up 36.24. The Dow closed at 17,907.87 up 323.35. The NASDAQ closed at 4,736.19 up 85.72
Market Direction Technical Indicators At The Close of Jan 8 2015
Let’s review the market direction technical indicators at the close of Jan 8 2015 on the S&P 500 and view the market direction outlook for Jan 9 2015.
Market Direction Technical Analysis for Jan 08 2015
Stock Chart Comments: Stocks today moved back above all the major moving averages and the 20 day simple moving average (SMA). The 20 day simple moving average (SMA) is still falling, but the 50 day is actually the average that is rising to meet it. It will push the 20 day SMA to move higher. The 2050 support level is back in play. The next level is the 2075 valuation and the S&P could easily take that either on Friday or on Monday. A lot will depend on the unemployment numbers on Friday.
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 back again as support. 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 again 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 but turned up again today.
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 moved higher quickly today and is ready to break into positive territory signaling further upside to the rally before it becomes overbought.
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.
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 again for Friday but also issued a strong buy signal today.
Market Direction Outlook and Strategy for Jan 9 2015
Technically the indicators are still predominantly negative but all of them are turning up. The two stochastic indicators which are often the fastest to report, are both positive and the Fast Stochastic issued a strong buy signal today.
With the market closing near the highs today I would expect some weakness sometime in the morning either at the open or later in the morning. A lot depends on the unemployment numbers. If they are disappointing we could see the S&P fall back before resuming the rally.
The outlook for Friday is for another move higher. Perhaps not the same strength we saw today, but certainly a positive close looks highly probable.
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