On Tuesday Walmart was the big culprit for the decline in stocks. It may have set some additional groundwork for Target which reports earnings on Wednesday. However the biggest problem for Wednesday may be the Shanghai Composite Index again as the Chinese stock market is selling off again this evening as I write the Market Direction Outlook for Wednesday.
Advance Decline Numbers for Aug 18 2015
Volume picked up slightly on Tuesday with 2.9 billion shares traded. 61% of all trades were moving to the downside. New highs rose to 96 on Tuesday. New lows though also jumped to 171 and are continuing to outpace new highs by a wide margin.
Market Direction Technical Indicators At The Close of Aug 18 2015
Let’s review the market direction technical indicators at the close of Aug 18 2015 on the S&P 500 and view the market direction outlook for Aug 19 2015.
SPX Market Direction Technical Analysis for Aug 18 2015
Stock Chart Comments:
Tuesday saw the SPX close at the 50 day moving average but the 20 day simple moving average (SMA) has now fallen below the 50 day issuing a short-term sell signal on the market direction.
Support and Resistance Levels:
These are the present support and resistance levels and there are still no changes.
2100 is light support. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
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: Momentum is barely positive and moving sideways.
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 today (Aug 18) which needs to be confirmed.
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 overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative and is pointing lower 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 signaling 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 signaling up for stocks.
Market Direction Outlook for August 19 2015
Technically the indicators are once again split. There are 4 pointing higher and one that issued an unconfirmed buy signal. One signal is pointing lower. Stocks should be moving higher based on the technical signals being seen however factors that are not technical in nature are driving the market presently.
This evening the Chinese stock market is back falling, down 2% at the time of my writing this article. This may impact stocks on Wednesday. As well Target reports its earnings on Wednesday and this could impact the market as well. The outlook however is still to the upside despite the market movement itself. Therefore technically for Wednesday the outlook is cautious but still up whereas my personal outlook is that stocks will move lower based on concerns for the Chinese market which at the time of my writing is down almost 3% after being down 6% on Tuesday. Altogether, the Shanghai Composite Index is down 30% from its high and looks to be heading still lower. This is not the usual backdrop for the US stock markets to rally.
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