The outlook for Tuesday for stocks was for the index to experience some weakness but close positive. The weakness after Monday’s gains is understandable and should end shortly. Let’s take a look at today’s action to see where stocks may head next.
Advance Decline Numbers for May 19 2015
Volume picked up on Tuesday from 2.9 billion on Monday to 3.3 billion today. New highs rose to 117 from 110 but new lows also rose to 40 from 27. 61% of all volume was to the downside and 38% to the upside.
Market Direction Closings For May 19 2015
The S&P closed at 2,127.83 down 1.37. The Dow closed at 18,312.39 up 13.51. The NASDAQ closed at 5070.03 down 8.41..
Market Direction Technical Indicators At The Close of May 19 2015
Let’s review the market direction technical indicators at the close of May 19 2015 on the S&P 500 and view the market direction outlook for May 20 2015.
Market Direction Outlook for May 19 2015
Stock Chart Comments:
A bit of weakness throughout the whole day was somewhat surprising. I had expected an opening bounce after Monday’s rise in stocks as a follow through. Then weakness for the morning but a pick up attempt in the afternoon and a positive close. While much of the day stocks followed the expected outline, the afternoon was still weak and the close was almost neutral with a slight bias lower.
The most important event today for the index chart was the Doji-cross which was formed at the close of the day. This is signaling a strong possibility of a pullback for Wednesday.
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 positive and trending sideways.
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 buy signal on May 14 that was confirmed on May 15. Today that buy signal continued to gain 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 is positive and rising toward overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change moved down today despite yesterday’s move higher. This could be signaling that the trend change to up is in jeopardy of failing but additional confirmation will have to be seen on Wednesday before any possible change in trend can be expected.
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 and is overbought. As well by the close the Fast Stochastic was signaling the possibility that a possible sell signal might be seen on Wednesday.
Market Direction Outlook for May 20 2015
By and large Tuesday’s sideways action was expected although I would have liked to have seen a slightly positive close. For Wednesday I am expecting more weakness in the morning but then a move higher into the afternoon and the close. However keep an eye out for a possible lower day due to the doji-cross at the end of the day’s trading today. That almost always signals a down day coming up, so while I am expecting higher prices into the close on Wednesday, we could see a further pullback instead thanks to the doji-cross candlestick.
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