With the markets overbought, resistance was already facing stocks when the disappointing revenue numbers from Morgan Stanley hit investors. Then the news that the Chinese economy’s GDP rose 6.9 percent which was above analysts estimates but below the Chinese government figure of 7 percent. That sent metals lower along with oil. The US dollar rose and investors spent the day waffling around the 2030 level on the SPX. While the Chinese numbers were not all that bad it is the perception of a slowdown that is impacting investors. With sellers standing at the 2030 level, stocks had a tough time gaining any traction.
Some analysts also blamed the sideways action on ghosts of the market crash of Oct 19 1987 citing investor nervousness. Much of the day was spent in negative territory although the close saw very modest gains.
Market Direction Closings For Oct 19 2015
The S&P closed at 2,033.66 up 0.55. The DOW closed at 17,230.54 up 14.57. The NASDAQ closed at 4,905.47 up 18.78.
Advance Decline Numbers for Oct 19 2015
Volume on Monday dropped by 500 million shares to 3.27 billion. By the close of the day 41% of all volume was being traded higher with 57% being traded lower. New highs still outpaced new lows at 55 with new lows at just 25. These numbers still point to the market pushing higher.
Market Direction Technical Indicators At The Close of Oct 19 2015
SPX Market Direction Technical Analysis for Oct 19 2015
Stock Chart Comments:
There is little change from Friday’s close except the closing candlestick was a doji-cross which normally signals a pullback for the following day. Meanwhile the index closed at the 200 day moving average having recovered the 50 and 100 day moving averages in last week’s rally.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 was light support. Below that was 2050 which was also was 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 is continuing to fall.
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 losing strength.
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 and starting to rise again.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive and rising as well.
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 pointing up for stocks and is still overbought.
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 up for stocks,and it is very overbought.
Market Direction Outlook for Oct 20 2015
Despite the technical indicator being positive there are signs of weakness which momentum and MACD are signaling to investors. The past couple of days momentum has been dropping which is never a great sign when a rally is stalled. The closing candlestick today was a doji-cross which often is a signal that a down day is about to occur.
As well earnings from IBM were disappointing after hours on Monday and the stock plunged about 4%. That is sure to impact stocks on Tuesday morning. Therefore I am expecting a lower day on Tuesday Oct 20.
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