Tuesday saw stocks dip in the morning as worries over a Russian downed jet fighter, poor consumer confidence numbers and a fairly good GDP number unsettled investors. By 11:30 though the concerns gave way to buyers returning as the price of oil climbed on the back of concerns the fighting in Syria could spread which would disrupt oil supplies. Meanwhile, traders are now betting 74% that the Fed will raise rates in December after today’s GDP number and rise in home prices which signaled residential real estate momentum is rising.
Gold rose today on the back of concerns over the downed Russian jet fighter but if this remains an isolated incident gold will resume its downward trend shortly.
Advance Decline Numbers
The dip in stocks in the morning brought in a bit more volume but the last hour also saw almost a billion shares traded with a total volume today of 3.84 billion shares. By the close up volume had moved to 67% of all trades. New lows pulled back once again with just 69 new lows versus yesterday’s 111 and Friday’s 122.
New highs were just 49 which is down from Monday’s 70.
The advance decline numbers show the market is continuing to try to contain sellers and move higher but new highs are far from strong which points to a weak advance to 2100.
Market Direction Closings
Advances were slight on Tuesday but still positive. The S&P closed at 2,089.14 up 2.55. The DOW closed at 17,812.19 up 19.51. The NASDAQ closed at 5,102.81 up just 0.33.
Market Direction Technical Indicators At The Close of Nov 24 2015
SPX Market Direction Technical Analysis for Nov 24 2015
Stock Chart Comments:
The S&P close on Tuesday was only slightly higher but managed to stay above the 20 day simple moving average (SMA). It is above all major moving averages. This is the fourth day with not much in the way of strength higher.
The 100 day moving average is still ready to move above the 200 day but again on Tuesday there was not enough strength to push it above the 200 day. Meanwhile the 50 day moving average despite turning up, has a long way to go before regaining the lead in market direction.
Meanwhile The 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 are starting to form a Bollinger Bands Squeeze.
The closing candlestick is again bearish for stocks on Wednesday.
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 back positive and trying to rise.
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 further on Tuesday and could become a buy signal if stocks move higher on Wednesday.
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 moving higher.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and trying to rise but the move up is slight at best. Still it is not negative which remains a plus for the bulls.
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 also signaling higher for stocks but the %K signal line is almost ready to cross below the %D signal line which will give a sell signal.
Market Direction Outlook for Nov 25 2015
On Tuesday the signals remained mixed as predicted but the recovery from the morning drop was interesting to see as it shows there are buyers still watching the market. Volume also was reasonably good and with 67% of all trades to the upside it shows investors are still hopeful stocks can break through 2100.
The closing candlestick today though is bearish for yet another day. Technically, there are many positive signals that are showing weakness but really only 1 indicator that is now negative, MACD, which is actually rising with its negative signal.
Therefore the bias from all the technical indicators is that stocks may have room to push higher. Indeed the drop Tuesday morning may have set the market up for a higher push on Wednesday.
Remembering the seasonality of Thanksgiving and looking at the number of positive technical indicators, the outlook for Wednesday, the final full trading day this week, is for stocks to move higher. It may not be pretty and it probably will not be straight up but overall Wednesday looks set to move higher, even if only slightly. My guess though is that we will see a better move higher than is expected.
For Wednesday I will label it “weakness but up”.
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