The market direction outlook for Monday was for stocks to move sideways but continue to keep the pressure to the upside. In other words, bias is still up. With the market sitting at all-time highs some selling should be expected as well as some consolidation. However with Japan pumping in liquidity and Europe expected to follow, stocks will be pushed to the upside more than the downside in my opinion. We will however continue to see consolidation days and sideways actions as well. Nothing goes straight up. Let’s start with a look at the intraday action for today.
SPX Market Direction Intraday for Nov 3 2014
You can see in the one minute intraday chart for the SPX below, the sideways action for today. Stock opened flat, tried to rally and then by 10:30 were sitting down at 2015. Selling was light which drew the attention of traders who then bought and pushed the SPX to new highs at 2024.46 shortly after 1:00 PM. There really was nowhere for the S&P to go though and without continued buying pressure, sellers stepped in. They sold the SPX back down to the 2015 level by around 3:30. The last half hour saw investors end the day with a very small rally which closed the S&P at 2017. Despite the sideways action through much of the day the S&P stayed above the 2010 level which remains a good sign for the market. There is no support to speak of at these levels. The first support line is at 2000 and it is light support. As long as the S&P stays above 2000 the market should eventually pick up and head higher.
SPX Market Direction Intraday for Nov 03 2014
Advance Declines For Nov 3 2014
Volume was lighter on Monday with 3.55 billion shares traded. Volume was almost equally split with 48% of all volume being traded to the upside and 51% to the downside. However new highs came in at 228 while new lows were just 31. The advance decline ratio still is bullish and points to higher valuations for stocks this week.
Market Direction Closings For Nov 3 2014
The S&P closed at 2017.81 down just 0.24. The Dow closed at 17,366.24 down 24.28. The NASDAQ closed at 46338.91 up 8.17.
The Russell 2000 IWM ETF closed down 20 cents at $116.36.
Market Direction Technical Indicators At The Close of Nov 3 2014
Let’s review the market direction technical indicators at the close of Nov 3 2014 on the S&P 500 and view the market direction outlook for Nov 4 2014.
Market Direction Technical Analysis for Nov 03 2014
Stock Chart Comments: Stocks basically were sideways on Monday although intraday they set another new all-time high. You can see in the chart that the Upper Bollinger Band continues to widen moving higher and away from the 50 day simple moving average (SMA). The 20 day EMA is turning back up as well. Once it crosses the 200 day exponential moving average (EMA), it will issue a buy signal to confirm higher prices still, for stocks.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling. 1956 and 1970 are back as support for stocks. 2000 is the highest level of support at present and while not strong, it should have enough strength to hold sellers back for at least a day in the event of an interim pullback. I am not expecting this to happen at this stage of the rally. The market direction looks like it wants to consolidate and then move higher.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating at this time.
Momentum: For Momentum I am using the 10 period. Momentum is still positive but pulled back slightly today.
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 October 22 which was confirmed on the 23rd. MACD is continuing 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 extremely overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change is staying positive and confirming the trend change to up.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is up but it is extremely overbought and the signal lines are close enough that we could see a pullback on 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 signaling down for stocks and is extremely overbought. It issued a sell signal for Tuesday at the close today.
Market Direction Outlook And Strategy for Nov 4 2014
The sideways action for today following the new highs on Friday is not unexpected. The technical indicators though are all pointing to higher prices except for the Fast Stochastic which indicates weakness for Tuesday and the Slow Stochastic that is more neutral than up. Therefore we could see more sideways action for Tuesday especially ahead of the elections results with the voters largely apathetic and disinterested in these mid-term elections.
Still though the liquidity Japan is pumping in will boost stocks in Japan which will translate into higher valuations in New York. The same holds true for Europe which is expected to announce their own liquidity type program. This is bound to push stocks higher in my opinion.
For Tuesday I am expecting another sideways type day but with the bias to the upside. As long as stocks stay above 2000 for Tuesday I believe stocks will rally shortly from here.
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