Two things seemed to impact stocks on Monday. The first was a change in outlook by investors following the October nonfarm payroll numbers from Friday. On Friday stocks sold lower in the morning and then spent the rest of the day moving higher and closing near their daily high. The S&P closed almost flat on the day and both the NASDAQ and the Dow saw gains.
Today investors decided that the chance of interest rates rising in December would be a detriment for stocks. As well China’s exports for October fell marking the fourth straight monthly decline. Imports also pulled back leaving China with the largest trade surplus to date. This though, signaled that the slowdown in China is continuing and that kept commodity prices lower even with the US dollar pulling back from its most recent highs.
Market Direction Closings
At the end of the day the indexes closed off their lows. The S&P closed at 2,078.58 down 20.62 but still above the 2075 level. The DOW closed at 17,730.48 down 179.85 but 63 points off its low. The NASDAQ closed at 5,095.30 down 51.82.
Market Direction Technical Indicators At The Close of Nov 9 2015
SPX Market Direction Technical Analysis for Nov 9 2015
Stock Chart Comments:
The S&P during the day broke the 2075 support level several times but managed to close above it. It reached the 20 day simple moving average (SMA) during the day and bounced off it. The close kept the S&P above the 2075 support level but below the 200 level.
Meanwhile the 100 day moving average is still moving toward the 200 day moving average and nearing the point where it may cross over and above the 200 day. That would be a bullish signal. However today’s selling may delay that.
The Bollinger Bands are moving higher as well following the market direction up.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 is light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 is light support. Below that is 2050 which is 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. Stocks continue to have trouble holding the 2000 level.
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 now 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.
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 of 384.72 points or 18% 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 is positive but on the verge of turning negative.
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 Friday Oct 2. That signal is almost gone and a sell signal is ready probably as early as Tuesday..
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 positive but falling swiftly.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but continuing to fall. The signal is weak and at 3.16 the rate of change may be warning of further weakness.
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.
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 pointing down for stocks.
Market Direction Outlook for Nov 10 2015
I had indicated earlier that Friday’s technical indicators were unimpressed with the rally back on Friday afternoon. They were certainly right. Now the technical indicators are 4 to 2 positive but the positive readings are falling quickly and are ready to turn negative on momentum, MACD and the Ultimate Oscillator. That would leave only the Rate of Change as positive.
Meanwhile the two stochastic indicators are pointing still lower for stocks.
Tuesday also looks weak. The morning looks like it might start with a sharp pop and then selling should erupt within a few minutes of the open.
2075 is only light support for stocks. The 2050 level is also light support while 2000 is where heavy support rests. Tomorrow we could see stocks try a recovery but the close looks poor for Tuesday. I doubt 2050 will be broken through on Tuesday. Volume today was light and while it was strongly negative, light volume often indicates there is no conviction to the selling. If that is the case then Tuesday could be weak but we should see more strength on Wednesday.
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