The outlook for Thursday was for a possible bounce in the morning and then more selling and a lower market. As explained on Wednesday night, the damage done to the market on Wednesday set Thursday up for losses.
The plunge on Thursday though was made greater by a strong negative reaction in European stocks to the ECB’s failure to increase the size of the present stimulus program. This along with an error in a Financial Times article pushed many investors who were short the Euro, to close positions which exacerbated the rally in the Euro. The Euro at one point on Thursday, had the biggest one day gain since 2009. As stocks fell, the afternoon selling was boosted by Fed Chair Janet Yellen’s comments on how confident in the US economy she was and how she was “looking forward” to a rate hike. The Fed meets Dec 15 and 16 to decide the next course of action on interest rates.
Index Closing Prices
All the indexes closed off their lows with the S&P closing at 2,049.62 down 29.89. The Dow Jones closed at 17,477.67 down 252.01 points and was down over 300 earlier in the afternoon. The NASDAQ closed at 5037.53 down 85.70 and nearing the 5000 level again.
Advance Decline Numbers
Volume on Thursday was 4.25 billion shares. 74% of all volume by the close was moving lower. New Lows rose to 158 while new highs were just 32.
On the NASDAQ volume was 2 billion shares. 20% of all volume was to the upside with 79% to the downside. New highs came in at 55 while new lows rose to 76. Thursday marked the 4th day of rising lows.
The advance decline numbers point to continued weakness but also the chance of a rebound rally as negativity has pushed the market into an oversold condition with new lows moving up quickly and outpacing new highs, especially on the S&P.
Market Direction Technical Indicators At The Close of Dec 3 2015
SPX Market Direction Technical Analysis for Dec 3 2015
Stock Chart Comments:
Technically the S&P did a lot of technical damage today but the push below 2050 was bought by investors later in the afternoon and the index closed right at the 2050 support level. This is light support but it could hold for another day if selling does not increase over what we saw today.
The index crashed through the 20 day simple moving average (SMA) today and hit the 100 day which is now leading the market and broke through to the 200 day which created a bounce. The close today was bearish for Friday.
The S&P is still in a Bollinger Bands Squeeze and the squeeze today appears to be pushing the index lower.
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 is light support. Below that is 2050 which is 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 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 sell signal on Friday Nov 10. The sell signal gained more strength 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 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 falling signaling the next move for the index will still be 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.
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 Friday.
Market Direction Outlook for Dec 4 2015
Friday is a big day for stocks. We get the nonfarm payroll numbers and today Weekly Initial Unemployment Insurance Claims continued to point to a strong unemployment report which could be the final report for the Fed to act to start to raise interest rates in December.
Technically a lot of damage was done today and all 6 indicators are now negative. Only the Ultimate Oscillator is definitely oversold which could assist the market in a jump higher on Friday.
All indicators are pointing to further weakness ahead for stocks so a bounce back on Friday, which may occur, might still see stocks sell-off on Monday.
Hopefully those investors who read my market direction last night reacted this morning and took short side positions for some intraday gains today. Friday looks like a bounce back could occur but it all depends on the nonfarm payroll numbers. The market will react to the numbers.
Technically the indicators are pointing to more downside but after such a big drop, we should look for a possible bounce to sell positions into. Then we can wait for the bounce to end, which could happen intraday. That will set the market up to fall back below 2050.
Friday then could see a bounce and then more selling as Friday is all about the jobs numbers..
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