The market direction so far today is not very encouraging for the bulls. The market keeps seeing sellers enter when the market moves up. The SPX is trying to hold the 1919 level of support and I must say for light support it is doing well. Selling pressure though, can only be handled for so long and then eventually the pressure will be enough that buyers will move lower realizing that buying this dip in stocks is not a smart move. If that happens, then the next stop will be 1870 which would conclude the pullback I have been writing about for months now. At that point the question would be whether the market decides to enter a flow blown correction mode or recovers and pushes back up. We will have to wait and see.
Volume Indicators
Volume by 2:40 is reasonable but not overly indicative of a sell-off or climax of any kind. With 2.4 billion shares traded the market looks like it may be set to end the day around 3 billion shares. A little on the light side although considering it is summer, 3 billion shares is probably average.
Meanwhile advancing issues are at 56% of all shares traded so far today and declining issues are at 42%. However looking strictly at volume, 55% of all volume is to the downside and 45% to the upside. The pressure to the downside remains constant for a second day today.
S&P Market Direction 2 Day Chart
The two day intraday chart set for 5 minute increments is interesting to view. You can see that today (Wednesday) stocks have been unable to recover to the 1930 level which is was at just as the news out of Ukraine hit the markets. On Tuesday the Ukraine news of Russia’s possible further involvement plunged stocks and took out 1919 on the way down. The market however rallied back at the close. Today the market opened below 1919 but then moved back to a high of 1927.91. The inability to push back to the Ukraine high point brought in sellers. Each subsequent little rally keeps bringing in more sellers. This is setting up the pattern of lower highs that we are seeing this afternoon. .
Outlook Into The Close
The most important aspect at the present time is for the S&P to hold the 1919 level and close above it. Having a close that matches Tuesday’s close will set the market direction up to begin a bottom phase. If the market can close almost at the same level as Tuesday’s close, Thursday will be the “swing day” meaning we will know on Thursday if stocks have reached a bottom here at the 100 day EMA and are set to try to recover or whether the past two days has been building for more downside action.
If stocks close below 1919, which is what I am suspecting will happen, then Thursday will see lower prices and the 100 day EMA will break. That means a move lower. The next support in the S&P is at 1870 which will mark a retreat of 121 points from the high of 1991.39 for a dip of 6%. That is not much of a dip considering how high stocks have come, but it will mean that 2014 has very little gains left.
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