The last 45 minutes of trading today once again saw investors or what may actually be computer programs picking up stocks and raising the market up 10 points to have the S&P close at 1990.26. Overall though the markets are reeling with uncertainty over the plunge in oil to fresh lows, an overabundance of gasoline that could last a year or more, the collapse of Chinese stocks overnight, a decline in European markets once again, another devaluation of the Yuan by China in an effort to boost their economy, a supposed test of an H-Bomb by North Korea and declines again in many base metals aside from gold which rose.
This evening as I write the market direction, the Shanghai Composite Index was halted within 30 minutes of trading as the market fell 7%. Most Asian markets were already down 1.7% by 10 PM EST. North American index futures are pointing to another large gap down open, although there is still hours before New York opens.
Advance Decline Numbers
Volume on Wednesday rose to 4.34 billion. There were 263 new lows on New York and 47 new highs. 84% of the volume traded was to the downside and 73% of all stocks were declining on Wednesday. The new 52 week lows on their own, point to further selling.
Market Indexes Closing Numbers
All indexes closed off their lows. The S&P closed at 1990.26 down 26.45. The Dow Jones closed at 16,906.51 down 252.15. The NASDAQ closed at 4835.76 down 55.67.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Jan 6 2016
Stock Chart Comments:
The S&P collapsed below the 2000 level today and even the last 45 minutes of heavier buying could not come close to recovering 2000. The index broke through the Lower Bollinger Band a signal for more downside ahead. All major moving averages are starting to turn lower. The 20 day is rapidly falling below the 100 day moving average.
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 today’s strong selling pressure. Stocks continue to have trouble holding above the 2000 level since the August 2015 correction.
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 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 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 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 on Tuesday had turned just slightly positive but today it turned back negative and is 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 Jan 4. That sell signal is gathering strength to the downside.
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 rapidly falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and took a sharp turn 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 lower 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 also pointing lower and is now deeply oversold but not flashing a bounce signal at this time.
Market Direction Outlook for Jan 7 2016
Uncertainty is what investors hate the most and today there were just too many uncertainties in a variety of areas from political to economic to military. Overall perhaps we should be surprised that the market held up as well as it did.
A bounce could happen at any time as the market is becoming deeply oversold. The problem is any bounce now is probably unsustainable and could actually last even just part of a day.
Technically the indicators show strong signs of a move lower by all 6 indicators. There are no positive signals.
For Thursday we could, as explained, always see an attempt to rally, but the direction for now remains lower. The S&P appears ready to take out light support at 1970.
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