The latest rally which started April 2 has had a combination of poor volume, poor advance decline numbers and was overbought. All of these combined with concern over the upcoming quarterly earnings results to turn the market lower today. As well traders in general tend to unload positions and readjust trades at important support levels and 2100 is an important level. In general then, today’s test of support at 2100 is not unexpected and looks like it may last another day at least.
Advance Decline for Apr 13 2015
Volume on Monday dropped by 200 million shares to 2.9 billion. You can tell that investors are staying cautious. Volumes remain poor. Down volume picked up the pace in the afternoon and reached 60% of all volume traded. Up volume was 39%. New highs were 107 and new lows just 6. The number of new lows is so low that it is a signal that this is profit taking and not much else at this point. If we see these 52 week lows start to climb past 50 or 60, that will be a sign of a larger pullback coming.
Market Direction Closings For Apr 13 2015
The S&P closed at 2092.43 down 9.63. The Dow closed at 17,977.04 down 80.61. The NASDAQ closed at 4,988.25 down 7.73.
Market Direction Technical Indicators At The Close of Apr 13 2015
Let’s review the market direction technical indicators at the close of Apr 13 2015 on the S&P 500 and view the market direction outlook for Apr 14 2015.
Stock Chart Comments:
Stocks pulled back after reaching the important 2100 level. The 20 day SMA continued to advance today and the losses were minor on all the exchanges. The Dow once more fell below 18000. At present this appears to be profit taking and not much more.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. Stocks will have to stay above it to change it back to support.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is at 1956.
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.
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 from the most recent high. 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 am using the 10 period. Momentum is positive but falling.
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 Apr 9 and that signal rose again today.
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 but took quite the tumble today and is sitting near neutral.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is signaling a sideways movement is developing.
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 still 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 also pointing up but could be on the verge of a sell signal if there is more selling on Tuesday..
Market Direction Outlook for Apr 14 2015
The technical indicators are still pointing higher but many took quite a fall today with the selling. In particular the Fast Stochastic and the Ultimate Oscillator look poor and ready to issue sell signals. The Rate Of Change though is just dipping slightly, indicating a possible sideways movement for the present time.
At 2100 there was bound to be selling. The market closed at the lows for the day on Monday and that usually sets up an early rally which I am expecting to see at the open and which should bring in more selling.
For Monday then look for stocks to rally at the open and then sell-off into the late morning. From there I am expecting a weak afternoon with some rally attempts but in general a lower close again. Profit taking at important valuations, such as 2100 is, usually lasts longer than one day so I would expect to see continued weakness again on Tuesday.
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