The outlook for the rally has remained positive. Even today with the see-saw back and forth it marked only the second day of attempting to break the 2000 resistance level. Once sellers gave way the S&P pushed beyond the 2000 level to close for another positive day marking this as among the best rallies this year. The minutes from the Fed’s September meeting were released and this helped push stocks higher as the underlying tone of the minutes pointed to a dovish stance and probably less chance of a rate rise this year. Basically the Fed minutes showed that while they felt it was close to a rate hike in September, they wanted to see if the global slowdown was going to impact the US. This also drove the dollar lower which helped to boost the price of oil.
Market Direction Closings For Oct 8 2015
Markets closed near their highs on Thursday. The S&P closed at 2013.43 up 17.60 and back above the important 2000 level. The DOW closed at 17,050.75 up 138.45 and back above 17000. The NASDAQ closed at 4810.79 up 19.64 and held back primarily by renewed pressure in Biotech stocks from a higher close.
Advance Decline Numbers for Oct 8 2015
Volume on Thursday fell to 3.9 billion shares traded but 78% of all volume was still to the upside. New highs reached 55 and new lows fell to just 12. It is incredible how quickly the lows have plunged as stocks have quickly recovered.
Market Direction Technical Indicators At The Close of Oct 8 2015
SPX Market Direction Technical Analysis for Oct 8
Stock Chart Comments:
The advance today broke through 2000 and now has the index above the 50 day moving average and on the verge of reaching the 100 day moving average. It has been a terrific rally and the Bollinger Bands Squeeze is finished with the Upper Bollinger Band moving higher signaling an uptrend is in place.
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.
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.
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.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and rising which signals a change back to up for stocks.
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 and is overbought.
Market Direction Outlook for Oct 9 2015
For Friday the market is facing an overbought condition which could stall the rally. As well the break of the 2000 level will probably be rechecked for support which means a drop back to near the 2000 level. As well the S&P 500 nearing the 100 day moving average so quickly is rare and usually is followed by a pullback before another push is made to turn higher.
Technically the indicators are positive but they are also overbought. With Friday at hand it won’t be surprising to see some weakness and while the outlook is still up, it could be a slightly positive or negative close on Friday as investors take additional profits, leave early on Friday following such a successful rally which has lasted all week.
Alcoa disappointed investors with less than stellar earnings today after the close. Investors may use that as an excuse to take some profits on Friday.
Friday then is a Weak Advance. This means we could see weakness and even a negative close but the underlying advance is still in place so weakness is a chance to set up more trades for next week..
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