The market direction outlook for Thursday Nov 7 2014 was for stocks to open strong, pullback and then climb again. The climb in the morning at the outset was a direct result of the mid-term elections ending and news of an ECB plan to enter into a quantitative style of stimulus for Europe. Interestingly former Fed Chair, Ben Bernanke, the author of QE, speaking at a conference indicated that he felt a QE approach would be difficult for Europe as these are independent nations within a political union. It should be interesting to see what happens upon implementation or what changes may have to be made to accommodate the EU political landscape.
Weekly Initial Unemployment Insurance Claims
Weekly unemployment claims today showed fewer job losses once again with benefits dropping by 10,000 to 278,000. Interestingly the jobs numbers continues to show slack within earnings as little pressure is being exerted for wage increases. This is a major factor in keeping inflation low which in turn is assisting the Federal Reserve in keeping interest rates at or near zero.
SPX Market Direction Intraday for Nov 6 2014
Today was a good example of the S&P following the outlook from last night. Judging market direction outlooks and daily movements comes from years of investing daily and following market trends. I have traded against the market trend for close to 4 decades now and that experience assists tremendously. But like all forecasts there will be strings of days where the outlook is wrong as the market is driven as much by emotion as it is by technical or fundamental factors.
Today’s intraday chart shows exactly what was expected. The morning opened with a bounce and then sellers stepped in and pushed stocks down by 10:30 to a low of 2015.86. This low was taken as a “buy the dip” opportunity and stocks moved back up recovering the morning high of 2025. There were two exceptional Trading For Pennies trades this morning. The first was holding puts into the sell-off to 10:30 and then buying calls for the move back up. I will post those trades shortly. This type of profitable trading is easy if you have confidence in the trend. I will include more on that in the members section.
The afternoon saw stocks trade sideways but not fall back below 2025. This brought in more buyers who pushed stocks still higher into the close setting another record all-time high and record close.
Advance Declines For Nov 6 2014
Volume was down slightly on Thursday to 3.6 billion shares. 58% of volume was up while 40% was lower but new highs fell off from yesterday’s 230 to 167 today. There were 60 new lows today. The bulls are still in charge but weakness for tomorrow appears fairly evident.
Market Direction Closings For Nov 6 2014
The S&P closed at 2031.21 up 7.64 for another new closing high. The Dow closed at 17,554.47 up 69.94 also a new closing high. The NASDAQ closed at 4638.47 up 17.75.
The Russell 2000 IWM ETF closed up 50 cents at $116.53 for a gain of 0.43%.
Market Direction Technical Indicators At The Close of Nov 6 2014
Let’s review the market direction technical indicators at the close of Nov 6 2014 on the S&P 500 and view the market direction outlook for Nov 7 2014.
Stock Chart Comments: The most important event today was the move still higher for stocks which is pushing the Upper Bollinger Band still higher. Stocks are following the band up. The second most important event was the 20 day SMA turning up and preparing to cross up and over the 100 day moving average which will be a buy signal for stocks to push still higher. The first level of support is
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 but pulled back despite stocks moving to another new high..
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.
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 and today it broke through to a reading of 5.34 which indicates strength to the upside. If however it moves much higher we could see a change in trend , even short-term.
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 neutral and it is extremely overbought.
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 to neutral for stocks and is extremely overbought.
Market Direction Outlook And Strategy for Nov 7 2014
The outlook for Friday and the rest of this article is for USA Members. The remainder of this article is a full discussion comparing Intel Stock and Qualcomm Stock to explain how to understand value when investing through Put Selling. This strategy portion is lengthy at 1500 words and will require 7 pages if printed. The length is important though as I explain why I would select one stock over another and how I approach selling options against a stock.
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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