The outlook on Friday was for the rally to end and the market to turn sideways and keep a bias to the downside. A large move down was not anticipated but certainly the bias was to the downside. By the time the market had closed on Friday the loss was 14.75 points for a drop of 0.70%. The big problem on Friday was back to bond rates and Greece. Let’s look at the technical outlook and see what investors should expect for Monday.
Advance Decline Numbers for June 12 2015
The drop on Friday was on anemic numbers. Only 2.7 billion shares were traded and of that volume 71% was to the downside. New lows though were just 86 and new highs came in at 49. These numbers do not point to a market ready to plunge. The very low volume can be partly blamed for the larger than expected decline. Light volume tends to move the markets higher or lower easier and that was part of the problem on Friday.
Market Direction Closings For June 12 2015
The S&P closed at 2,094.11 down 14.75. The Dow closed at 17,898.84 down 140.53. The NASDAQ closed at 5,051.10 down 31.41.
Market Direction Technical Indicators At The Close of June 12 2015
Let’s review the market direction technical indicators at the close of June 12 2015 on the S&P 500 and view the market direction outlook for June 15 2015.
Market Direction Technical Analysis for June 12 2015
Stock Chart Comments:
The close on Friday pushed the index back below the 50 day moving average but the close was above the intraday low. At 2094.11 at the close, the S&P can easily regain the 2100 level which is rapidly becoming an important technical support point for this market.
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 very 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 negative and 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 sell signal on May 29. The sell signal is slowly weakening.
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 falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change is signaling that a sideways market may be developing.
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 still signaling up 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 up for stocks but the sharp move lower on Friday has set the Fast Stochastic up for a possible sell signal should the index pullback Monday morning.
Market Direction Outlook for June 15 2015
Technically there are 3 negative indicators, one sideways indicator and 2 indicators still pointing higher, one of which is on the verge of a sell signal. We could therefore say the market technically is 4 to 2 in bias for more downside action on Monday.
With the Greek problem still at the forefront and concerns about the Euro growing again, Monday looks like it will be a down day. About the only thing that could this around would be a resolution to the Greek issues on debt management. That looks unlikely.
Monday could see a bit of a bounce at the outset but then more selling throughout the day.
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