The move higher by the S&P on Tuesday by the close following another dip in stocks to the 1914 value in the early afternoon, may be getting ready to set the market up for a second day of a rally. The opening jump on Tuesday was stronger than the jump on Monday but stocks still had a tough time as the price of oil slipped below $30.00 a barrel before recovering to close at $30.44. At $29.93 oil is at its lowest level since Dec 1 2003. Volume traded on oil futures was 43 percent above average daily volume as investors betted on both sides of the oil market.
Market Indexes Closing Numbers
All indexes closed off the early morning highs. The S&P closed at 1,938.68 up 15.01 after flirting with the important 1920 light support level for the third day. The Dow Jones closed at 16,516.22 up 117.65. The NASDAQ closed at 4,685.92 up 47.93 thanks in large part to a rally in Apple and Intel Stocks.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Jan 12 2016
Stock Chart Comments:
The S&P is made a lower high today but failed to make a higher intraday high. The morning opening rally was lost once again and the market turned negative sliding down to 1914 before recovering. The last hour saw strength return as the S&P move higher to close with gain of 0.78%, the first such gain for the new year.
All the major moving averages are continuing to fall but the closing candlestick moved back inside the Lower Bollinger Band today as the market struggles to try to build some kind of base. Meanwhile the closing candlestick often signals a move lower in the next day or two but is not accurate more than 50% of the time.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 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 what is now more than an entire year.
2100 was light support. Stocks have been unable to stay above this level. 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 in August and September and again failed to hold under last week’s selling pressure. Stocks continue to have trouble holding above the 2000 level since the August 2015 correction.
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 is now resistance. 1920 is light support but cannot hold determined selling from breaking through. It has however, held the market up for 3 days. 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 2015.
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 all-time high of 2134.72. This would be the biggest correction since 2011 plunge 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 is finished.
Momentum: For momentum I use a 10 period when studying market direction. Momentum on Tuesday turned up slightly which confirmed yesterday’s overview that while the market was falling toward 1900, momentum was not falling deeper.
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 Jan 4. That sell signal weakened slightly on Tuesday.
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 oversold and bouncing back.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and turning up slightly. This could signal a change in trend, if only fort a short period of 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 issued a buy signal today and is deeply 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 issued a weak buy signal yesterday which was confirmed today. It too is deeply oversold.
Market Direction Outlook for Jan 13 2016
The market is trying to build a base or even a short-term bottom. All the technical indicators are negative but most are turning up. We could see some weakness on Wednesday in the early morning but signals point to the market trying to rally for another day. While any rally will be suspect for the present, it is still good to see the market trying to build some momentum to the upside.
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