The market direction outlook for Monday was for stocks to continue to move lower. In fact for sometime on Monday stocks actually tried to hang in above 1900 or certainly the 1900 level itself. In the end though, there seemed to be too many comments on interest rates both pro and con and investors finally seemed to give up and sold out of more positions.
SPX Market Direction Intraday 1 Minute Chart
The opening on Monday started with a slight push back above 1910. That failed almost immediately and stocks fell back eventually hitting just above 1890 by mid-morning. This brought in some buyers who began to pick up stocks but once the market was back up over 1910, stocks once more wavered. Around 2:00 PM as has been the case for several days now, investors decided to sell out and they pummeled stocks in the late afternoon sending the index down to 1874.74 by the close, right above the important 1870 support level.
Market Direction intraday for Oct 13 2014
Advance Declines For Oct 13 2014
Despite the dramatic late day plunge in stocks, volume was not quite so negative, although it was negative. Volume was again high with 4.35 billion shares traded, however 65% of stocks were falling while 32% were actually advancing. New lows though are now plaguing the market direction as 421 new 52 week lows were made and only 9 new highs. The market is definitely bearish.
Market Direction Closings For Oct 13 2014
The S&P closed at 1874.74 down 31.39. The Dow closed at 16,321.07 down 223.03. The NASDAQ closed at 4213.66 down 62.58.
Market Direction Technical Indicators At The Close of Oct 13 2014
Let’s review the market direction technical indicators at the close of Oct 13 2014 on the S&P 500 and view the market direction outlook for Oct 14 2014.
Market Direction Technical Analysis for Oct 13 2014
Stock Chart Comments: The most important event today was the break of 1900 and the plunge in the late afternoon which saw the market direction close near the lows of the day at 1874.74. Almost all the heavy selling took place in the later afternoon which plunged stocks.
Strong Support Levels are at 1870 and 1840 (no longer shown). Both levels are now in jeopardy of being broken through but the overbought nature of the market may stall the descent or certainly slow it down.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating at this time. That however could change if the selling intensifies..
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is negative and extremely oversold.
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 Sept 10. MACD is negative and extremely oversold.
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 extremely oversold.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change fell lower and is extremely oversold.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is lower. It is extremely oversold.
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 still signaling down and it is extremely oversold.
Market Direction Outlook And Strategy for Oct 14 2014
You can see from the technical indicators that everything is pointing to further punishment for stocks but all the technical indicators are also extremely oversold. Such an extreme oversold condition among all the technical indicators is almost always followed by a bounce. Whether stocks can bounce on Tuesday is anyone’s guess but with the market ready to break through 1870, I would expect some push back from investors who may go bargain hunting here.
Any bounce though would be a temporary lull in the sell-off. The market direction down seems intent on testing 1850 as its next stop. So while a bounce could happen due to the extremely oversold conditions, it would be an opportunity to lock in some profits and buy more downside shares in Ultra Pro short ETFs such as the SDOW.
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