Friday May 8 saw one of the bigger one day rallies this year. This may set the market up for more upside or it could be another rally that will fail to break stocks out of the range they have been trading in since January.
Advance Decline for May 8 2015
Volume dropped by 300 million shares on Friday despite the huge rally. 3.4 billion shares traded which is slightly below average for this year. Obviously a lot of investors decided to take a wait and see approach to the rally. 84% of all trades were to the upside and while new highs rose, they still were poor at just 74 new 52 week highs and 26 new lows. The day belonged to the bulls on Friday but better numbers to the upside would be more convincing.
Market Direction Closings For May 8 2015
The S&P closed at 2,116.10 up 28.10. The Dow closed at 18,191.11 up 267.05. The NASDAQ closed at 5003.55 up 58.00.
Market Direction Technical Indicators At The Close of May 8 2015
Let’s review the market direction technical indicators at the close of May 8 2015 on the S&P 500 and view the market direction outlook for May 11 2015.
Market Direction Technical Analysis for May 8 2015
Stock Chart Comments:
The S&P recovered back above the 50 day simple moving average (SMA) on Friday and pushed to within 8 points of making a new all-time high and recovered the 2100 support level yet again. The strength of the rally was decent although volume was slightly lower than average. What the market needs to see now is new 52 week highs of 150 or more, each day to prove there is upside potential. Otherwise the market runs the risk of turning back down 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 to neutral on Friday.
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 confirmed sell signal on May 5. On Friday that sell signal weakened..
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 and is rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change has signaled a change to the downside but the rebound on Friday has placed that trend lower into jeopardy.
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 issued a confirmed sell signal on Wednesday but on Friday issued an unconfirmed 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 for Monday.
Market Direction Outlook for May 11 2015
Friday saw one of the better one day rallies this year. We have though seen this story many times before and often the big one day rally is nothing more than a bounce.
For the market to prove there is upside potential it must begin to signal new 52 week highs on 150 stocks a day. That will be a good sign that the market is finally going to break out of the pattern it has been stuck in since December.
The technical indicators are still biased to the downside but all were pushed higher on Friday and two are signaling new up signals. For Monday I am expecting weakness in the morning and then another move higher into the close. If the rally falters on Monday it will be a poor sign for stocks. We have seen constant rallies this year that have had no follow through. Monday needs to show some follow through and it is questionable whether investors will see any.
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