Despite the decline in oil again on Monday, investors took it in stride as there is a growing belief that the high US dollar may force the Federal Reserve to postpone raising rates this spring. The outlook is that raising rates now, with the dollar at 12 year highs, could damage the recovering economy. Indeed with 3 steady months of declining retail sales numbers among other indicators continuing to point to a somewhat unsteady recovery, many investors are pinning their bet on the Fed holding off on raising interest rates this spring. With that in mind, the market has had 2 weeks of selling which has left it in an oversold condition and ready for a bounce. Last week a number of bounces failed and were given back.
Meanwhile, today’s bounce was seen by many investors as just another so-called “dead cat bounce”. But with the Federal Reserve set to commence its next meeting on Tuesday, investors were obviously betting that rates will remain unchanged. However if the Fed removes the word “patient” from its outlook, that may send stocks back down.
Advance Decline for Mar 16 2015
Volume on Monday was lower than Friday’s by 100 million shares at 3.3 billion. 142 stock made new highs while 96 made new lows. Up volume was 74% of all trades on Monday. The new highs doubled from Friday’s close while new lows feel only slightly. For the rally to continue, new highs must push to 200 and new lows must fall back below 40 otherwise stocks can move higher but it will be erratic and uneven with continued whipsaws.
Market Direction Closings For Mar 16 2015
The S&P closed at 2081.19 up 27.79 . The Dow closed at 17,977.42 up 228.11 The NASDAQ closed at 4929.51 up 57.75.
Market Direction Technical Indicators At The Close of Mar 16 2015
Let’s review the market direction technical indicators at the close of Mar 16 2015 on the S&P 500 and view the market direction outlook for Mar 17 2015.
Market Direction Technical Analysis for Mar 16 2015
Stock Chart Comments:
Another day and another rally. The difference might be that this rally already was above the important 2050 level and has now moved above the 2075 level. It is also back above all three major moving averages and within easy striking distance of reaching 2100 again. In general though the market is range bound and not actually going anywhere. It closed the first trading day of the year at 2080.35 and today closed at 2081.19. So while it is true that the market was only down about 5% at the lowest level so far this year, the rallies back remain uneven, erratic and for the most part unprofitable except for those trading in the markets. Investors who have been simply holding the index have seen no gains yet this year.
Monday’s rally was good to see. Now we need a few days to confirm the rally can get moving. For that outlook let’s review the technical indicators and see what they say.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. 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 recent pullback. That may not happen this time. Weak support is at 1970. Stronger support is then 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 at this point and it is not something I am anticipating at present.
Momentum: For Momentum I am using the 10 period. Momentum is negative and trending sideways with a slight bias up following today’s rally.
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 weak sell signal on March 4. That sell signal on Monday continued but it losing strength.
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 turned positive today and is continuing to rise.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is continuing to point to the index moving lower.
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 for Tuesday and confirmed Friday’s buy 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 signaling up for stocks and confirmed Thursday’s buys signal.
Market Direction Outlook for Mar 17 2015
Technically the indicators in general are showing some movement to the upside. Both stochastic indicators are pointing to up and the Ultimate Oscillator is now positive and climbing. The other indicators are negative but have rising readings, even if only slightly.
But Tuesday will depend primarily on the Fed Chair Janet Yellen and her comments. The markets have been choppy but depending on what the Fed comments are, the market could push higher. Whether it can break out of the range it is stuck in is questionable and even if it does a new question arises – just how high can the market move anyway?
This is definitely a traders market. My market direction portfolio has done well and is far ahead of the markets but it is because it is being traded and the wide swings up and down over the past two and a half months has allowed for some excellent returns. But for those simply holding indexes, performance has been poor and disappointing.
For Tuesday, if the Fed says nothing to alarm investors, the market will move up. If anything remotely alarming is mentioned, such as the removal of the term “patient”, then stocks are going to move lower or at the least, end close to unchanged on Tuesday.
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