The outlook for Friday was for stocks to enter a weak advance. This is a period when there are small gains or small losses as the rally stalls as an overbought condition combined with resistance from sellers at the 2020 level holds the rally back. However the rally is still underway.
This is what happened on Friday with modest gains but overall it was the best week for stocks in 2015.
Fed Interest Rate Discussion Again
On Friday, New York Fed President Dudley speaking on CNBC indicated that there was still a chance for a Fed rate increase by year-end but it was dependent on economic data. There are just two more Fed meetings which could result in interest rate changes. Those are Oct 27 to 28 and December 15 to 16. If interest rates stay unchanged at the end of October, there is no chance for a rate increase until mid December which appears incredibly unlikely heading into the Christmas Holiday Season. I personally doubt there will be any increase until sometime in 2016, which gives the market two and a half months of reprieve before facing any real possibility of an interest rate hike.
Market Direction Closings For Oct 9 2015
Markets closed off their highs on Friday. The S&P closed at 2014.89 up 1.46 after briefly touching 2020 intraday. The DOW closed at 17,084.49 up 33.74 and above 17,000 for the second time in the week. The NASDAQ closed at 4,830.47 up 19.68 for the best gain among the indexes.
Advance Decline Numbers for Oct 9 2015
Volume on Thursday fell to 3.7 billion shares traded a drop of 200 million shares. Trading was balanced with 51% of all trades to the upside and 48% to the downside. There were 54 new highs and just 12 new lows, almost unchanged stats from Thursday’s close. With new lows back to just 12 for the second day in a row, the strength and momentum still remain bullish.
Market Direction Technical Indicators At The Close of Oct 9 2015
SPX Market Direction Technical Analysis for Oct 9 2015
Stock Chart Comments:
The advance was stalled on Friday with the S&P closing below the 100 day moving average but above the 50 day for the second day. The Upper Bollinger Band continues to move higher which often indicates there is more upside ahead. The closing candlestick though is a doji-cross or a star-cross which often indicates a change for the following day..
The 20 day simple moving average (SMA) is turning back up. The 200 day is still leading the market followed by the 100 day and 50 day but that could change shortly if the rally continues. The 50 day is turning higher. The Index closed below 2020 after briefly touching it but above 2010. It is important for the S&P to break the 2020 level and close above it. 2000 at this point remains the most important support level and up until August, it had held the market up against all dips.
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 was light support. Below that was 2050 which was also was 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.
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 rising slightly but showing signs of slowing.
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 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 overbought for the fourth day.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and steady indicating the rally is still in progress but slowing.
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 pointing up for stocks and is 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 pointing up for stocks, is overbought and turning sideways indicating a possible top is forming for a day or two until the overbought condition is worked out.
Market Direction Outlook for Oct 12 2015
For Monday stocks look set to remain weak as the overbought condition continues. We could see a pop at the open and then some selling as the S&P pushes to 2020 to move above it. The likelihood of breaking through on Monday is probably 50/50 but unless a new catalyst to the downside emerges there is still more upside to the present rally. The S&P has enough momentum in play at present to push to take 2020. Whether there is enough to make it to 2050 is questionable for Monday and perhaps Tuesday.
Monday will probably be the weakest day so far in the rally and may see a negative close as overbought conditions pressure stocks. A negative close on Monday will not mean the rally is over.
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