The Market Direction Outlook for Monday was for stocks to move up but I suggested caution ahead of the next move primarily because 2100 has been a “tough nut” to crack so to speak.
In my afternoon Intraday Chart Analysis on the members site today I showed the chart below of the S&P for the past 12 months. This chart shows just how difficult it has been for the S&P to take the 2100 level and then move beyond it. To date, that has just not happened. In in the late Spring and Summer this year when the market moved above 2100, the rallies lasted for only a short period before stocks slipped back below 2100.
This is one tough resistance level, to be sure.
2100 Has Been Tough To break
Still though it was great to see the move higher today even though it was on the back of low volume.
Market Direction Closings For Nov 2 2015
At the end of the day the indexes closed on their lows. The S&P closed at 2,104.05, up 24.69 and finally above 2100. The DOW closed at 17,828.76 up 165.22 and back into positive territory for the year. The NASDAQ closed at 5,127.15 up 73.40 and in no small part due to Biotech stocks rising today.
Advance Decline Numbers
Volume on Monday fell by 500 million shares to just 3.7 billion and almost a billion of those shares were in the last 40 minutes. 85% of all volume was to the upside and 80% of all stocks listed on New York moved higher. New lows fell to just 26 and new highs rose to 71 a decent jump from Friday’s 59.
The NASDAQ had 83 new highs and 47 new lows. This compares with Friday’s 47 new highs and 79 new lows so the numbers today at the close were far more bullish.
Market Direction Technical Indicators At The Close of Nov 2 2015
SPX Market Direction Technical Analysis for Nov 2 2015
Stock Chart Comments:
The S&P closed above 2100 and the 200 day moving average. It is also at the top of the Upper Bollinger Band. The 20 day simple moving average (SMA) is moving above the 200 day which will issue a third buy signal from the 20 day SMA.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 is 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 positive and back rising on Monday.
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 Friday Oct 2. That signal continues to lose 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 back into an overbought signal.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and pulled back somewhat again on Monday. Still the reading is too high for much of a sustained move higher. There is almost always a pullback of some kind when the signal is this high. A drop in the signal to between 6.00 and 5.00 would indicate more upside.
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 deeply overbought and is at neutral to move into Tuesday.
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 pointing up for stocks and is extremely overbought.
Market Direction Outlook for Nov 3 2015
This is the start of the best 6 months of the year. This has been a phenomenon for decades and one that is rarely wrong.
The market though is back to being extremely overbought. The move higher today though could push the indexes higher again on Tuesday before more selling retested the 2100 level.
For Tuesday stocks look set to move back to below 2100 for a quick morning test and then stocks should push the S&P higher into the close. That should set up Wednesday for some overbought selling. My outlook then is still up but once again cautious. I am continuing to keep the focus on protecting my capital.
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