Stocks rallied in the morning but as expected, gave back the rally and at times wavered between losses and gains. In general investors were trying to decipher Fed Chair Janet Yellen’s comments and continued to worry about oil prices and a global economic slowdown. In the end stocks ended mixed.
Fed Chair Janet Yellen
Nothing much new from Janet Yellen aside from comments that basically hinted that the Fed chief has not made up her mind completely, regarding a possible rate hike in March. She remains concerned about inflation but is equally concerned about signs of slow growth in global communities. In essence nothing much new but she didn’t sink stocks which was good to see.
Index Closing Prices
The indexes closed mixed on Wednesday. The S&P closed at 1,851.86 down 0.35 but still holding the 1850 valuation level. The Dow Jones closed at 15,914.74 down 99.64 and closing below 16,000. The NASDAQ closed at 4,283.59 up 14.83.
Advance Decline Numbers
Volume on Wednesday fell back to 4.48 billion shares declining from yesterday’s 5.2 billion shares. By the close, 53% of all volume was moving to the downside and 46% was rising. 52% of all stocks on New York were rising and 45.6% were declining. New lows fell dramatically to 174 from yesterday’s 481 and new highs were down from 69 yesterday to 47 today.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Feb 10 2016
Stock Chart Comments:
The S&P closed below the 20 day simple moving average (SMA) again on Wednesday. The 50 day is continuing to fall away from the 100 day leaving the market with a strong sell signal as the 200 day leads the market presently. The Bollinger Bands Squeeze is continuing and stocks are trying to break free of the Lower Bollinger Band in an effort to rise ,however the Bollinger Bands Squeeze is pointing lower for stocks.
The closing candlestick is more bullish than bearish for stocks and often marks a reversal in one or two days. However as investors saw today, rallies bring out sellers who dump more shares. In general it was a poor day with poor breadth, a lack of buying interest and dominated by sellers. Despite this more stocks rose than fell on New York.
One good sign was the close of the S&P still holding the 1850 level. That though may not last long.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 2100 is resistance.
2075 was light support and is also resistance. Below that is 2050 which is also light support but continues to hold the market up at present.
Stronger support was at 2000 which is now resistance.
Weak resistance is at 1970 while stronger resistance is at 1956 and technically it is more important than 1970 for the market. 1940 was light support and was retaken on Friday and reached again today. 1920 was light support and is back as resistance. 1900 is more symbolic than anything else.
1870 is resistance. 1840 continues to be support. The 1820 level is light support but again held up well in the sell-off of the last two weeks.
1775 and 1750 are both 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 all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of 271 points for a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative and but trying to rise.
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 Jan 28. Today MACD issued a weak sell signal. This signal is unconfirmed. We will need to see the reading on Thursday to determine if the sell signal is valid.
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 back negative and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and back moving sideways. The reading at the close was negative 3.73 almost unchanged from Tuesday’s signal. It is not supportive of a move higher at this time.
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 pointing down for stocks.
Market Direction Outlook for Feb 11 2016
All the technical indicators are now negative. MACD issued an confirmed weak sell signal today. Most of the negative signals are still moving to the downside indicating there is pressure building to the downside.
However the closing candlestick disagrees and points to the likelihood stocks will move higher on Thursday.
Personally I think all the technical indicators are probably more correct. We could see a bounce attempt on Thursday but overall stocks look set to tumble still lower, probably to the 1820 valuation level.
A rebound rally could happen at any time but in general the SPX Index is more poised to fall than an advance. The outlook is for stocks to end the day lower on Thursday.
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