Wednesday’s market was interesting as it stayed positive all day. There was really none of the weakness I had expected to see. The rally came on the back on Fed comments that the expected rate hike in December looks like a “done deal”. That means the Fed plans an interest rate hike for December as they indicated the economy is strong enough to warrant the increase. While many analysts felt this was the cause of the rally, I found that somewhat confusing as an interest rate hike is rarely good for risky assets. Instead I think the rise today came after the Fed minutes indicated “the pace of increases” would be gradual. Investors I believe took this to mean a rate hike in December does not necessarily mean further rate hikes in 2016. For this reason they bought stocks..
Advance Decline Numbers
Volume was lower with 3.9 billion shares traded but by the close 88% of all volume was to the upside. 75% of all stocks on New York were moving higher by the close. New lows were higher again though at 134 but new highs crept up slightly to 47. The advance decline numbers still point to poor market breadth but the NASDAQ numbers were worse with 168 new lows and 66 new highs. In general stocks have to see new highs above at least 150 daily to indicate a strong move higher for stocks. The numbers today show lots of interest in pushing stocks up as seen by the 75% of all stocks moving higher but investors have to wonder how the market will hold above 2100 through 2016 unless corporate profits can improve which is something they have not done in almost a year. Today’s advance decline numbers still advise caution.
Market Direction Closings
The S&P closed at 2,083.58 up 33.14 for one of the best one-day gains of the year and certainly in more than a month. The DOW closed at 17,737.16 up 247.66 and back within striking distance of 18000.. The NASDAQ closed at 5075.20 up 89.19 and back above 5000..
Market Direction Technical Indicators At The Close of Nov 18 2015
SPX Market Direction Technical Analysis for Nov 18 2015
Stock Chart Comments:
The S&P closed back above all three major moving averages and the 20 day simple moving average (SMA) today.
The 100 day moving average is back pushing to the 200 day and almost ready to overtake it. Meanwhile tThe Lower Bollinger Band is still moving above the 50 day moving average which is a bearish signal and at the same time the Bollinger Bands look like they may be starting to form a Bollinger Bands Squeeze. This needs to be watched.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 is light support. Below that is 2050 which is light support. Stronger support is at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction. Stocks continue to have trouble holding the 2000 level.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support. 1920 is now light support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August.
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 of 384.72 points or 18% from the all-time high of 2134.72. 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 use a 10 period when studying market direction. 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 Friday Nov 10. That sell signal is weakening.
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 back positive and looks ready to rise further.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and moving up signaling the market will move higher.
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 has a strong up signal now in place.
Market Direction Outlook for Nov 19 2015
Volume pulled back today which was disappointing but is becoming normal as volumes below 4 billion share days are more the norm now than in 2014. The technical indicators have changed to 4 up and 2 down but the 2 down are also rising.
While I believe the rally remains somewhat suspect and investors should remain cautious it is also important to trade what we see. The trend is higher as investors want to challenge 2100 again. Even if Thursday ends up weaker than I would expect, Friday should then see the 2100 level reached and crossed over.
The outlook is back to up for Thursday.
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