The big news on Monday was the striking of a deal with Greece and the EU that keeps Greece within the EU. My outlook was that in the end Greece would probably leave the EU behind and probably some of the debt would be forgiven. If the deal struck with the EU is agreed to and passed by the Greek Parliament, Greece will get a third bailout but no forgiveness of debt. While this may be an uphill battle for the Greek government to get approval, it would appear that Greece will stay and continue with austerity measures which now includes among other things higher sales taxes and pension reforms and cuts. The news of the deal added to the rally’s push and ended the day with strong gains.
Advance Decline Numbers for July 13 2015
Volume came in at 3.1 billion on Monday with 78% of all volume moving up. New lows fell to 77 while new highs came in at 116 which is a jump in new highs over Friday.
Market Direction Closings For July 13 2015
The S&P closed at 2,099.60 up 22.98. The Dow closed at 17,977.68 up 217.27. The NASDAQ closed at 5071.51 up 73.82.
Market Direction Technical Indicators At The Close of July 13 2015
Let’s review the market direction technical indicators at the close of July 13 2015 on the S&P 500 and view the market direction outlook for July 14 2015.
Market Direction Technical Analysis for July 13 2015
Stock Chart Comments:
The S&P rally continued for a second day moving up another 1.11%. This places the S&P up for the year a little over 1.5%. It also places the S&P back to the 2100 support level after retaking 2075 on Monday. The S&P closed at the highs for the day placing it right at the 50 day moving average. The 20 day simple moving average (SMA) has stopped falling.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have hardly changed in months as the market continues to move sideways.
2100 was light support and is now light resistance. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is 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 and bring to question whether the bull market is finished.
Momentum: For Momentum I am using the 10 period. Momentum surprising stayed negative all day and closed almost neutral on the day. A rally of this size should have pushed momentum into a positive reading 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 June 29. The sell signal is active but is quite weak. Another up day and it will become a buy signal.
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 positive and rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change has signaled that there is little downside danger for stocks. Today it moved higher which looks like it is preparing for an up signal.
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 up for stocks.
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.
Market Direction Outlook for July 14 2015
If Greece fails to pass the deal with the EU on Wednesday stocks will move lower. Otherwise stocks should continue to move up. Tuesday should see some selling after two days of strong buying but the trend higher looks to be intact for now. With momentum failing to turn positive on Monday despite the big rally, it is signaling that some selling is about to occur. This could open up some trading opportunities for the next move higher. The problem is a lot of investors who are not in on this rally will now want in. For those investors any dip will be a buying opportunity so any selling on Tuesday may not last long.
The trend for now is back to up even if there is some weakness on Tuesday, especially in the morning.
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