The Market Direction Outlook for Wednesday was for selling in the morning and then an attempt to retake 2100. In my outlook I explained that if the market fails to retake 2100 it risks falling to 2075 which is the next level of support.
There were a number of reasons for the drop including a drop in durable goods orders which is the 3 drop in four months. Basically this statistic tells economists whether businesses are confident in the growth of the economy to be inventorying items. Obviously after 3 drops, the answer is they are not. There was also rumors of turmoil in the Middle East and Saudi Arabia in particular. As well the old fear of rising interest rates and whether stocks are cheap. But on top of this is also the problem of no new capital, just trades and technical indicators that kept pointing to the rally as suspect.
Advance Decline for Mar 25 2015
Volume on Wednesday was up by 300 million shares to 3.5 billion but there was no panic selling despite the push lower into the close. Down volume made up 74% with up volume just 25%. New highs came in at 70 and new lows at just 12. These are once again not the new highs a rally needs. Down volume as a percentage though has certainly been worse in big down days.
Market Direction Closings For Mar 25 2015
The S&P closed at 2,061.05 down 30.45. The Dow closed at 17,718.54 down 292.60. The NASDAQ closed at 4,876.52 down 118.21 for the worst performance of the three indexes. All three indexes closed at their lows.
Market Direction Technical Indicators At The Close of Mar 25 2015
Let’s review the market direction technical indicators at the close of Mar 25 2015 on the S&P 500 and view the market direction outlook for Mar 26 2015.
Market Direction Technical Analysis for Mar 25 2015
Stock Chart Comments:
I indicated yesterday that selling would have to pick up for the S&P to get below 2075 by Wednesday and the importance of the market to hold 2100. Both of these events occurred with the SPX not being able to retake 2100 and heavier selling during the afternoon breaking the breaking below 2075. While the S&P can push back in a bounce, today’s action technically ends the latest rally. The long candlestick from today ended at the low for the day and down below the 50 day moving average but above 2050. With 2075 broken, the market is turning more bearish. The Upper and Lower Bollinger Band are drifting lower and the 20 day simple moving average (SMA) is also turning lower.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. 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 recent pullback.
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.
Momentum: For Momentum I am using the 10 period. Momentum is positive but pulled back today.
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 on March 20 which was confirmed on Monday March 23. Today MACD issued another sell signal. This sell signal needs to be confirmed.
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 now negative and oversold.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change throughout the most recent rally continually refused to signal a definite market up. Instead it kept trending sideways and kept a negative balance. The last 3 days have shown us why. The rate of change is now pointing to a resumption of a downtrend.
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 yesterday had a weak up signal still in place. Today by the mid-morning that signal was pointing to sell.
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 sell signal on Tuesday and confirmed that today with another stronger sell signal.
Market Direction Outlook for Mar 26 2015
The technical indicators are showing that the market rally is over. The market today closed at the same level as before the Fed started its rally. Tomorrow could see a rally back but looking at the advance decline numbers and the technical indicators, right now at least, any bounce back is highly suspect and probably a chance to set up trades to the short side of the market.
Special Strategy Article For Members
For FullyInformed Members, both USA and Canada, I will be posting a special article about the day’s activities and my strategies for the downturn. It will be included in the investing strategy notes before the markets open tomorrow.
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