The market direction outlook for Monday was for stocks to be weak in the morning but not fall by much. I then expected the SPX to attempt to retake the 50 day simple moving average (SMA). I explained that I did not know if the SPX would retake the 50 day on Monday or Tuesday but the odds of the S&P making it over the 50 day were good.
SPX Market Direction Intraday for Oct 27 2014
The one minute intraday chart below shows the market direction morning weakness. Stocks dipped below 1956. I did not expect this and anticipated weakness might get the SPX down to 1958 but instead weakness pushed the S&P below 1953 which was unexpected. That early morning weakness though brought in the “dip buyers” and the rest of the morning, stocks traded between 1956 and 1960 with a spike almost to 1965. The afternoon saw little interest in stocks as they trended primarily sideways. At the close a small push managed to move stocks to above 1960 with a close of 1961.63 which was down for the day. Needless to say the 50 day simple moving average (SMA) was not overcome.
SPX market direction intraday for Oct 27 2014
Advance Declines For Oct 27 2014
Volume was up by 500 million shares on Monday to total 3.5 billion. Of the volume being traded 66% was down. 55% of all issues were declining but only 56 new lows were made while 107 new highs were seen.
Market Direction Closings For Oct 27 2014
The S&P closed at 1961.63 down 2.95. The Dow closed at 16,817.94 up 12.53. The NASDAQ closed at 4485.93 up 2.22.
The Russell 2000 IWM ETF closed down 6 cents at $111.01
Market Direction Technical Indicators At The Close of Oct 27 2014
Let’s review the market direction technical indicators at the close of Oct 27 2014 on the S&P 500 and view the market direction outlook for Oct 28 2014.
Market Direction Technical Analysis for Oct 27 2014
Stock Chart Comments: Stocks turned sideways and failed to cross the 50 day simple moving average (SMA) but stayed above the 20 day simple moving average (SMA). The 20 day SMA meanwhile continued turning sideways rather than moving lower. The market stalling here at the 50 day EMA for today was not unanticipated. Tomorrow though it needs to break through.
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 but held the market up.
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 and rising.
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. At present it is not supporting a higher move for stocks than we have seen.
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 and it 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 still signaling up but is turning sideways.
Market Direction Outlook And Strategy for Oct 28 2014
Technically the indicators are bullish but a number of overbought and the Fast Stochastic is turning sideways indicating that the rally may run out of steam here below the 50 day simple moving average (SMA). If this indeed happens, selling will commenced and could become quite nasty. At this time I don’t see this happening but it would not take much to get selling started if it looked like the rally was not going to challenge the old highs.
Tuesday may start with a quick sharp bounce and then a pullback. The bounce if we get it, will be important. If it can push above the 1965 level and hold it will set the market up to challenge investors who are sitting at the 50 day simple moving average (SMA) and dumping stocks each time investors push back up.
For Tuesday I am expecting a move above the 50 day simple moving average (SMA). Even if it is challenged and falls back, it will be a good signal that the rally has enough strength still to take out the 50 day simple moving average (SMA). That will set up stocks to continue the rally into mid and late week. Tomorrow then will be important for stocks.
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