The market direction outlook for Wednesday Nov 4 2014 was for stocks to bounce at the open on the back of the end to the mid-term elections and then some selling to enter and keep the market down. Instead stocks did jump at the open, then sold off deeper than I would have expected but then moved back higher than I expected as well.
Overall with the question of the mid-term elections out-of-the-way, another hurdle has been overcome by the markets.
Let’s once again look at the 5 day chart.
SPX 5 Day Market Direction Intraday for Nov 5 2014
The five-day chart shows that the bias remains to the upside. On Friday last week the 2000 level was broken although this did leave a large gap open which almost always will be filled at some time. That could mean a pullback coming up will fill that gap. However on Friday the big jump placed stocks squarely above 2000 which is a support level going back into the summer months.
Friday’s big jump was met by Monday’s move to a new all-time high. Tuesday saw stocks retest the 2000 level and then push back higher. Today, Wednesday, stocks once again tried to break to a new high after an early morning bounce.
We can also see that if the 2000 level of support should break, stocks will move quickly back to 1970 which has another band of support. However it is obvious from the chart below that the trend remains higher for stocks at this time.
Market Direction SPX 5 day chart
Advance Declines For Nov 5 2014
Volumes are starting to return to normal and leaving the doldrums of the summer period behind us. Today volume hit a respectable 3.8 billion shares. 62% of all volume was to the upside and 230 new highs were made and only 67 new lows. The bulls have control of the market direction at present.
Market Direction Closings For Nov 5 2014
The S&P closed at 2023.57 up 11.47 and closing right near the all-time highs.. The Dow closed at 17,484.53 up 100.69. The NASDAQ closed at 4620.72 down 2.91.
The Russell 2000 IWM ETF closed up 21 cents at $116.03.
Market Direction Technical Indicators At The Close of Nov 5 2014
Let’s review the market direction technical indicators at the close of Nov 5 2014 on the S&P 500 and view the market direction outlook for Nov 6 2014.
Market Direction Technical Analysis for Nov 5 2014
Stock Chart Comments: Stocks moved higher on Wednesday but are still within striking distance of the 2000 level. The Upper Bollinger Band is moving higher and the market is following it. The 20 day simple moving average (SMA) is continuing to turn back up and could cross the 100 day moving average as soon as Friday if stocks continue higher. The three levels of vital support for this rally are shown in the chart.
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 still 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 and turned back up 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. 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 which at this point is good for stocks and will help lead stocks higher. The Ultimate Oscillator can stay overbought for an extended period of time especially if the other indicators are positive and climbing as well.
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, however it is having trouble moving higher which indicates some lack of conviction among investors for placing much new capital to work in stocks at these levels..
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 down and it is extremely overbought. The readings are very close so the signal is more neutral than actually down 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 signaling up for stocks and is extremely overbought. Today’s up signal needs higher valuations tomorrow to confirm the change in trend from down to up.
Market Direction Outlook And Strategy for Nov 6 2014
The rest of this article is for USA Members and includes full strategy and trade discussions as well as a look at Intel stock for tomorrow’s trading and my outlook for Thursday and the end of the week.
FullyInformed USA Members can login directly through this link to review the latest market direction outlook and investing strategy notes for Nov 6 2014 or Members can sign in to the full USA members site here. Non-members can join here or read about the benefits of being a member.
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