Thursday was certainly an interesting day. The outlook was for stocks to remain weak, move lower but for a bounce to always be a possibility. Who would have thought we would get all of it in just one day!
SPX Market Direction Intraday Oct 2 2014
Selling commenced right from the start and by 11:30 the market direction was plunging to break the 1930 support level. Juts like 1975, 1930 is important support. It is the final level of support from the August pullback before the market pushed down to 1904. The rally back up, after the market broke through 1930 was swift. Many analysts saw 1930 this time around as another support point for stocks.
When 1930 broke, investors stepped in immediately and began to buy. The buying lasted the rest of the day and the S&P closed at 1946, which is below the important 1956 level but above 1930.
It was a wild roller coaster day as stocks head into the employment report on Friday.
Market Direction intraday for Oct 2 2014
Weekly Initial Unemployment Insurance Claims
The weekly jobs numbers released today came in at 287,000 for the week showing continued strengthening among the unemployed. This year the numbers continue to show improvement almost every month. Claims are now at an 8 and a half year low. For Friday economists are expecting the economy will have added 225,000 jobs but they are not expecting the unemployment rate to change from 6.1 percent.
Advance Declines For Oct 2 2014
Volume fell just slightly today with 4 billion shares traded. The morning saw the higher volume with 2 billion shares traded before the noon hour as the downturn in the morning seemed to catch a lot of investors by surprise. The move lower also must have triggered a lot of stop-losses as stocks quickly fell. There were 253 new lows today and just 11 new highs. The advance decline ratio continues to support a move lower for stocks but the rally back from noon hour to the close was impressive and might set the market up for a day or even two days of rallying.
Market Direction Closings For Oct 2 2014
The S&P closed at 1947.17 up 0.01. The Dow closed at 16,801.05 down 3.66. The NASDAQ closed at 4,430.19 up 8.11.
Market Direction Technical Indicators At The Close of Oct 2 2014
Let’s review the market direction technical indicators at the close of Oct 2 2014 on the S&P 500 and view the market direction outlook for Oct 3 2014.
Market Direction Technical Analysis for Oct 2 2014
Stock Chart Comments: The plunge today saw key support levels break at 1930. The SPX was as low as 1926.03 before it rebounded. The SPX is below the 100 day EMA for the second day although the rebound from the morning low was impressive and steady.
1994 Support: The 1994 level is now resistance.
1975, 1956 Support: Both are light resistance..
1930 Support: Light support is found at 1930 which broke today but was quickly recaptured.
Strong Support Levels are at 1870 and 1840 (no longer shown). At present I am not expecting any break of either of these levels. The continued strength of the decline this morning makes it quite possible the 1870 level will be reached which would put the SPX below then 200 day EMA and into a full correction.
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 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 as there are no signs of any impending correction of that magnitude.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum remained negative 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 confirmed sell signal on Sept 10. MACD continued to strengthen to the downside today.
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 was negative again today but moving higher.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change was negative and continued to fall today but is not yet signaling a bounce up.
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 giving a down signal and is 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 signaling up at the close today and is also extremely oversold.
Market Direction Outlook And Strategy for Oct 3 2014
The rally from the late morning into the close was impressive and shows just how deeply oversold the market direction down has become. What investors now need to see is a move higher tomorrow to confirm that the market direction up has a few legs still left before more selling enters stocks.
Today’s decline was solid n the morning but stocks rose steadily all afternoon.
I am continuing to trade with the focus to the downside. Put contracts sold are closed at the first sign of trouble or when there is a profit of 25% or better in a trade. No trades are being left to expire.
For Friday I am expecting decent employment numbers and a move sideways and up for stocks. I expect today’s bounce has still another day to work itself out. I am not expecting that stocks will fall further than 1920 on Friday. Today’s move up from the bottom needs confirmation tomorrow. I am expecting that will happen.
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