The market direction outlook for Friday was for stocks to be somewhat weak in the morning but by the afternoon close near the 50 day simple moving average. Stocks did just this as they continued their advance despite recent poor earnings results from many larger names such as IBM, McDonald’s, Coca Cola, Netflix, Amazon and others. At present investors are focused on the good earnings reports which is typical of a bull market in rally mode.
SPX Market Direction Intraday for Oct 24 2014
The one minute intraday chart below shows the market direction intraday on Friday. At the open the market jumped breaking through 1956. Then weakness erupted for about half an hour as some investors worried about another Ebola case, this one in New York, but within half an hour investors were shrugging it off and pushing the SPX back to the important 1956 valuation. This has been support for the previous rally after the pullback at the start of August. By 11:00 AM the market direction was trading above 1956 and by the lunch hour it was above 1962. A minor dp after the lunch hour brought in more investors and the market direction continued higher. The last half hour saw more investors piling in and stocks closed at the high for the day. A close at the high often means a pullback on the following day at the start so I’ll be watching for softness to start the day off on Monday.
SPX Intraday for Oct 24 2014
Advance Declines For Oct 24 2014
Much of the volume on Friday was in the afternoon. For the day volume fell considerably to 3 billion shares down from 3.8 billion on Thursday. 60% of the volume was to the upside with 37% to the downside. There were just 81 new highs versus 101 on Thursday. New lows came in at 27. It is not unusual for low volume on Fridays.
Market Direction Closings For Oct 24 2014
The S&P closed at 1964.58 up 13.76. The Dow closed at 16,805.41 up 127.51 and within 200 points of 17000. The NASDAQ closed at 4483.72 up 30.92.
The Russell 2000 IWM ETF closed up just 19 cents at $111.07 failing to join in the day’s continuing rally.
Market Direction Technical Indicators At The Close of Oct 24 2014
Let’s review the market direction technical indicators at the close of Oct 24 2014 on the S&P 500 and view the market direction outlook for Oct 27 2014.
market direction technical analysis of SPX for Oct 24 2014
Stock Chart Comments: Stocks continued to advance and closed just below the 50 day simple moving average (SMA) and above the 20 day SMA. The 20 day SMA meanwhile is turning sideways rather than moving lower. The market may stall here at the 50 day EMA for some of Monday but it looks on track to break through shortly. 1956 is once again support.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling. 1930 was given up yesterday. 1956 is also resistance for stocks and today was tested a number of times.
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 has been the best indicator, replacing MACD as the most accurate indicator. Momentum is still positive.
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 overbought.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change is still oversold but is turning up. The change of trend signal remains in place but the signal continues to stay negative. The signal needs to turn positive for the rally to continue much higher.
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.
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 still signaling up.
Market Direction Outlook And Strategy for Oct 27 2014
It has been quite the week for stocks. From the depths of the prior week, stocks have defied analysts and bears alike by pushing back higher. Investors now seem determined to take back the territory that was lost in the most recent correction.
The technical indicators at the close are bullish in general with just the rate of change refusing to turn positive. A number of indicators are reaching toward being overbought although Friday’s lower volume has stayed the two stochastic indicators from pushing solidly into overbought. The close below the 50 day SMA is perfect for the start of this week.
Monday will most likely start with some opening weakness, but we should see stocks be picked up in any morning dip and move higher. Whether stocks can close above the 50 day SMA on Monday is not as important as not falling back to 1956. I am not expecting stocks to pullback that far. I think a pullback to 1958 to 1960 in the morning but I do believe stocks will either close above the 50 day on Monday or Tuesday. Stocks though are entering overbought so some sideways action is definitely going to be seen.
For USA Members, the mid-term outlook SPY Calls which were bought on Oct 17 are now up 71%. For USA members, checking the Market Trend link is worthwhile especially for those investors who cannot trade the market direction movements intraday. In the last correction, the mid-term Spy Puts returned 104%. While these percentages are smaller than trading the SPY or Ultra ETFs daily, they can still be significant returns for those investors who do not have intraday trading access. Remember, check the Market Trend link or look for a link when there is a change. I post as link when there is a change to the mid-term outlook.
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