Most of the rally continuing on Wednesday was caused by oil prices rallying, a slight decline in the US dollar and an inflation report that basically pointed to a decline in inflation caused by cheaper gasoline. This tied in with the recent consumer reports that showed consumers are spending the savings cheaper gasoline is providing. For many analysts it seems the two reports are the best of both worlds – a drop in inflation caused by lower gasoline prices and a rise in consumer spending as a result. Analysts in general now believe on Thursday the Fed will hold off on any interest rate increase and may not act until December at the earliest. This could cause the rally to bounce higher on Thursday if indeed the Fed announces no rate increase. On the other hand, a rate increase may also get a bounce until investors start to wonder when the next Fed rate increase will be.
All in all then, it was a good day in general for stocks and the S&P is back to 1995 just resting below the 2000 level. Now its up to the Fed on Thursday.
Market Direction Closings For Sep 16 2015
The S&P closed at 1,995.31 up 17.22. The Dow closed at 16,739.95 up 140.10. The NASDAQ closed at 4,889.24 up 28.72.
Advance Decline Numbers for Sep 16 2015
Volume today rose 400 million shares to 3.6 billion with 89% of the volume moving up and just 11% moving down. New highs came in at 31, the highest level in more than two weeks and new lows fell back to 49. 75% of all stocks were climbing on Wednesday.
These numbers are beginning to show a possible rebound for stocks as new highs are starting to climb. The market will need to see over 100 new highs daily and new lows drop back below 20 to really jump the market over the 2000 level and keep it there.
Market Direction Technical Indicators At The Close of Sep 16 2015
Let’s review the market direction technical indicators at the close of Sep 16 2015 on the S&P 500 and view the market direction outlook for Sep 17 2015.
Market Direction Technical Analysis for Sep 16 2015
Stock Chart Comments:
Today’s rally pushed the closing candlestick further above the 20 day simple moving average (SMA) for the second time in 20 trading days. The 50 day is continuing to fall below the 100 and 200 day moving averages. The Bollinger Bands are moving toward forming a possible Bollinger Bands Squeeze by early next week unless the S&P can retake the 2000 level and hold it.
The S&P broke through the 1956 support level on Tuesday and today moved above the 1970 level to 1997 before closing at 1995.31, within 5 points of retaking the important 2000 level.
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.
2075 was light support. Below that was 2050 which is also was light support. Stronger support was 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 and 1900 have very little if any 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: Momentum is positive and climbing.
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 Sep 10. Today the buy signal gained more 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 rose rapidly throughout the day. It is nearing overbought but there is room for more upside.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative but is rising slightly.
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.
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.
Market Direction Outlook for Sep 17 2015
Technically we have 5 indicators pointing up for stocks and 1 indicators pointing lower. However the day will belong to the Federal Reserve Chair Janet Yellen. This is among the most anticipated interest rate announcements this year. The announcement could bounce the market higher no matter what decision the Fed takes. Even a rise in rates could see a short-term rally before investors become worried again about the timing of the next interest rate rise.
The prediction is difficult for tomorrow although personally I think we could see a positive close.
Just remember that next week is historically poor for the markets with the Dow down 19 of the last 24 years as many institutions restructure portfolios at the end of the third quarter.
In general though, revenue numbers have to improve for the market direction to keep moving higher and until that happens every rally I think, remains suspect. The rally over the past two days has been in anticipation of the Fed’s announcement. Just like all rallies, investors are drawn into a rally as it climbs, fearful they may be missing out on the next big move up. Any sign of selling and investors will dump positions as quickly as they entered them. Tomorrow could see a rise then, but depending on what the Fed announces on Thursday, Friday could see a lower day.
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