The outlook for Monday was for stocks to advance slightly if the open was positive, but to stay weak. The day ended with small gains but there are signs the market may turn lower on Tuesday ahead of some key earnings.
Advance Decline Numbers for July 20 2015
Volume was 3.2 billion shares but 70% of the volume was lower despite the positive close. 284 new lows were made which marked another jump in new lows and 107 new highs were made. The bears are taking control and Tuesday could see stocks slip lower.
Market Direction Technical Indicators At The Close of July 20 2015
Let’s review the market direction technical indicators at the close of July 20 2015 on the S&P 500 and view the market direction outlook for July 21 2015.
Stock Chart Comments:
The most important event on Monday was the two candlesticks at the end of the day. Both candlesticks are negative for stocks and the fact that Friday’s candlestick was ignored by investors makes Monday’s candlestick even more important. It points to down for stocks.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have hardly changed in months as the market continues to move sideways.
2100 is light support. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is at 1956.
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.
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 most recent high. 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 am using the 10 period. Momentum is positive but turned sideways.
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 July 14. The up 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 overbought and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal has changed to down.
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 up for stocks and it is overbought.
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 up for stocks and is also overbought.
Market Direction Outlook for July 21 2015
Stocks are very overbought and the closing candlesticks from Friday and today, Monday, are strongly negative for stocks. Both stochastic indicators are turning back down even thoughi they are still positive at the close today. The advance decline numbers strongly support a move to the downside. Overall stocks look set for a down day on Tuesday ahead of big quarterly announcements from Apple among others.
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