Today’s sell-off was all China. Let’s look at the advance decline numbers and then the technical indicators for today but it will be a tough call for Thursday no matter what the technical indicators advise.
Advance Decline Numbers for July 8 2015
Volume dropped back a bit today to 3.6 billion but of that volume a full 93% was to the downside. New lows came in at 217 and are not showing signs of increasing. New highs were just 17. Obviously a very bearish day.
Market Direction Closings For July 8 2015
The S&P closed at 2,046.68 down 34.66. The Dow closed at 17,515.42 down 261.49. The NASDAQ closed at 4909.76 losing 87.70.
Market Direction Technical Indicators At The Close of July 8 2015
Let’s review the market direction technical indicators at the close of July 8 2015 on the S&P 500 and view the market direction outlook for July 9 2015.
Market Direction Technical Analysis for Jul 8 2015
Stock Chart Comments:
The drop placed the S&P back to the lows from Tuesday’s morning before the market recovered. The 20 day moving average is turning back lower and the index closed below the 200 day moving average.
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 was light support and is now light resistance. 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 was 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 still 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 June 29. The sell signal is active and gaining strength again.
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 turned sharply lower and is negative.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is turned sharply lower today but it is not signaling a definite down. If anything it is signaling more sideways action lies ahead.
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 stocks and is deeply oversold.
Market Direction Outlook for July 9 2015
Technically the indicators are all negative and aside from the Fast Stochastic, are showing no signs of a bounce back. A drop as steep as Wednesday’s though is almost always followed by a bounce back and the Fast Stochastic is deeply oversold. We could see a bounce in the morning for Thursday and then additional selling. It is a tough guess as much of the action tomorrow will depend on the Chinese market. The Chinese government is trying everything to stop the slide. Often that is the worst thing to do as stocks are an emotional investment and sometimes emotion has to run its course. Any good news tomorrow should send stocks rallying but after the past 6 days I would be surprised to see the market recover yet again in a single day.
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