The bounce on Wednesday was once again larger than anticipated. The outlook was for stocks to try to bounce again after recovering on Tuesday to close almost unchanged. As well technically the market was deeply oversold and due for a bounce. The bounce today though was stronger than expected due to a decline in the US dollar and belief that the Greek – German impasse over Greek debt would be settled (for now). Financials and energy stocks led stocks higher as rising interest rates will assist bank profits and oil prices continued to climb which will boost energy corporate profits. .
Advance Decline Numbers for June 10 2015
Volume picked up slightly today with 3.4 billion shares traded. Of that volume 81% was to the upside. This pushed new highs to 119 and pressured new lows back to 85.
Wednesday definitely belonged to the bulls.
Market Direction Closings For June 10 2015
The S&P closed at 2,105.20 up 25.05. The Dow closed at 18,000.40 up 236.36. The NASDAQ closed at 5,076.69 up 62.82.
Market Direction Technical Indicators At The Close of June 10 2015
Let’s review the market direction technical indicators at the close of June 10 2015 on the S&P 500 and view the market direction outlook for June 11 2015.
SPX Market Direction Technical Analysis for June 10 2015
Stock Chart Comments:
The close on Tuesday set the market up for the rebound rally today. The strength of the rally was decent and pushed the index to above the 50 day moving average and well inside the Lower Bollinger Band. The close was just above the 2100 level (again).
Support and Resistance Levels:
These are the present support and resistance levels.
2100 is very light support. 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 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 May 29. The sell signal was weakened today by the strong rally.
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 signaling that a sideways market may be developing.
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 still signaling up for stocks and is oversold..
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 is no longer oversold.
Market Direction Outlook for June 11 2015
Technically the indicators are moving higher. Two indicators are positive and rising (the stochastic indicators). Three are still negative but also rising. One, the rate of change, is almost neutral pointing to a sideways condition as starting for the market direction.
While the bounce today was very good, it did not draw in large volumes. Instead the outlook for stocks is more back to sideways with a bias slightly higher. Investors have seen this type of rally before. Often there is no follow through and stocks start to drift. For Thursday expect stocks to start higher and then move lower into the morning. By the afternoon I would expect a slightly higher close but no rally like we saw on Wednesday.
Remember though, don’t be surprised if stocks move lower on Thursday. Since January this market has not shown at signs of follow through from big up days. Thursday may prove to be the same, once again, however I would not expect a large drop on Thursday even if the day is negative. Also Tuesday’s market closed with a doji-cross candlestick which often signals weakness. Often that weakness can appear a day later than expected so it may still impact stocks on Thursday or Friday.
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