The market direction outlook for Friday was for stocks to continue to advance. Positive home sales that surprised many analysts helped to extend gains on Friday. Economists were expecting 429,000 new home sales in April but the number of new homes came in at 433,000. Still though this is below April of 2013 when new home sales were 446,000. Still though these was enough to push investors into buying heading into the Memorial Day weekend. The S&P closed at a new record high of 1900.53 and perhaps more important, the NASDAQ managed to squeak out a gain for the week.
Market Direction S&P Intraday Chart May 23 2014
Intraday on Friday the market direction opened flat with a bit of weakness. Within half an hour a rally commenced which took the S&P to the 1898 level. From there the S&P turned sideways but without any selling. With no pressure to the downside, investors bought further and rallied higher into the close. For the first time the old all-time closing high was broken.
Advance Declines For May 23 2014
New highs on Friday continued to advance slightly reaching 138 or about 5 new highs over Thursday. Meanwhile new lows fell to 56. For volume 65% of stock advanced while 31% declined. Volume was still somewhat light with 1.6 billion shares to the upside and 727 million to the downside.
Market Direction Closings For May 23 2014
The S&P closed at 1900.53 up 8.04. The Dow closed at 16,606.27 up 63.19. The NASDAQ closed at 4,185.81 up 31.47
The IWM Russell small cap ETF had aother good day rising $1.21 for a gain of 1.09% to close back above the 200 day EMA at $111.97.
Market Direction Technical Indicators At The Close of May 23 2014
Let’s review the market direction technical indicators at the close of May 23 2014 on the S&P 500 and view the market direction outlook for May 27 2014.
There have been two key support levels in the market following the sell-off which ended in early February. They are the 1750 level and the 1775 level. If 1750 were to break, stocks would move considerably lower as a lot of investors would bail out at 1750. There are though two key higher levels that have now gained prominence. The first is 1840. In the last small pullback in mid April, 1840 was the level that held the market in check. Since then support has also been building at 1870. 1870 is important support for a move above 1900. For 1900 to be held, there must be a support base. 1870 is that base and 1840 is the second base which 1870 has built upon. Today the push to close above 1900 is a result of support that held at 1870 on Monday and Tuesday.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past four months, replacing MACD as the most accurate indicator. Momentum is back positive and climbing.
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 May 15. On Friday MACD issued a weak buy signal. We need confirmation of the buy signal on Tuesday.
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 continuing positive and is now overbought.
Rate Of Change is set for a 21 period. The rate of change remains positive on Friday and is starting to climb.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is up.
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 that the market direction is up and it is overbought..
Market Direction Outlook And Strategy for May 27 2014
Over the last 27 years the Dow has been up 19 times on the day after Memorial Day. For the week however, the Dow has been down 10 of the last 17 years so historically we have a mixed outlook for the week. Meanwhile also historically, the NASDAQ has seen a sell signal during the final few days of May, which has marked the summer correction that is once again anticipated this year. In general June has always marked the end of the best 8 months of the year for the NASDAQ.
The market direction technical indicators are now all positive. There are also strong overbought signals as well which could make a move higher at this point, difficult. Nonetheless the momentum is to the upside and with the technical indicators all pointing to higher prices for the S&P for the start of this week, the market direction outlook is for stocks to move higher on Tuesday, even just marginally, after the Memorial Weekend.
The last item to mention is the big signal from MACD. While the signal was weak on Friday, we could see that buy signal confirmed on Tuesday at the close. This would mark the first time the MACD and Momentum indicators are pointing up together in many weeks.
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