The outlook for Friday was for the markets to continue with a downward bias, especially if oil continued its slide. While there is the potential for a bounce back, the outlook remains bearish. On Friday stocks easily took out the 2050 level of support and by late morning investors had pushed stocks through the 2025 light support and lower. At one point in the day the 2008.80 value was reached on the S&P and it looked like the 2000 level was going to be reached. Buyers stepped in though but with lackluster buying, sellers retained the upper hand and buyers could only recover about 4 points by the close. The S&P closed down at 2012.37 for the worst one day decline since Sept 28.
Advance Decline Numbers
Volume on Friday reach 4.26 billion shares and a full 91% of that volume was lower. New lows reached 359 and new highs just 6. These lows are similar to the lows from the August market collapse. 87% of all stocks on New York were falling on Friday. It was an incredibly bearish day.
Market Indexes Closing Numbers
All indexes closed near their lows on Friday. The S&P closed at 2012.37 down 39.86. The Dow Jones closed at 17,265.21 down 309.54. The NASDAQ closed at 4933.47 down 111.71.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Dec 11 2015
Stock Chart Comments:
The sell-off on Friday pushed the S&P below all the major moving averages. The 50 day is continuing to stay above the 100 and 200 day moving averages which is a strong up signal, but stocks nonetheless moved considerably lower. The plunge on Friday could set the 50 day up, for a move back below the 100 and 200 day moving averages. On Friday the outlook seemed particularly grim which was in stark contrast to the moving averages issue buy signals as the 50 day moved above both the 100 and 200 day moving averages.
Support and Resistance Levels:
These are the present support and resistance levels. Almost since the start of this year, these support levels have not changed. That is unusual for the stock market and is the first time since I started investing in the early 1970’s that the same support levels have been referred to for an entire year.
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 is 2050 which was also 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. Stocks continue to have trouble holding the 2000 level.
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 negative and moving lower.
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 sell signal on Friday Nov 10. The sell signal is gaining 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 negative and falling. It is now oversold.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and moving lower.
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 down for stocks and is oversold.
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 signaling down for stocks and is also oversold.
Market Direction Outlook for Dec 14 2015
For Monday the technical indicators are very bearish. There are no positive indicators among them. There are however 3 indicators that show the stock market as being very oversold. The Fast Stochastic has the deepest oversold signal. Often these types of signal are followed by a market bounce back of a short duration.
With the Fed meeting and decision on interest rates to be held on Tuesday, it is doubtful the market will rally with any kind of conviction. The outlook appears fairly grim for stocks at the present time and more downside action is expected for Monday.
While, as explained, there is the potential for an oversold technical rally on Monday, the biggest catalyst to any rally would be a rise in the price of oil and/or some kind of announcement that the Fed plans to not raise interest rates for December. I am not expecting either to be the case.
For Monday then while there is always the possibility of a technical bounce, the outlook is for the markets to move lower. If there is a rally, it should be sold into to raise cash levels..
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