The outlook for Market Direction today was for the market to continue their move lower. With MACD giving ann unconfirmed sell signal yesterday, today’s bounce is suspect and could be a rebound rally after the past 3 days of selling. The market has not had 3 down days since September and investors who have waited to get into stocks at lower prices may feel that the last 3 days has brought prices down enough. Traders on the other hand love days like the last 3 days to profit from the swings, like today.
So has the market direction of the last 3 days done much damage to the upswing? Let’s take a look and see.
S&P Daily Market Direction Action
The last month below gives us a very good understanding of technically what the market direction is doing. I have marked the key aspects on the chart below.
A. The market high sitting just below 1800 is the top that needs to be broken. You can see that on Nov 15 when the top was made the following trading day Nov 18 the market pushed up and was rejected and therefore it closed lower. However the two tails at either end of the candlestick show that the market direction higher was rejected but the market direction lower saw investors push back at the close to keep the market direction up intact and failing to close at the low of the day.
B. Nov 19 saw the market open and fall lower but again investors pushed back up and closed off the lows which is why you can see a tail on the red candlestick. Nov 20 saw the market open of Nov 19 not able to hold the open of Nov 19. I drew the arrow marked B to show that the open of Nov 19 must be broken and held. It was not done yesterday so today (Nov 21) we must see the S&P 500 hold above the arrow marked B to confirm that today’s bounce back is actually a move back higher.
C. The morning we opened higher than yesterday’s close. At the time of writing this article the S&P has pushed right back to the open of Nov 19 but so far has not been able to break the high of Nov 19 and Nov 20. This is a sign of a bounce back or what is often referred to as a “dead cat bounce”.
The move today must hold above point B to confirm that we will not see some additional lows after today.
Meanwhile momentum which I have marked as point D has pushed up which is nice to see. However MACD continued to grow to the downside with a reading of negative 0.50. This though is not a big downside number so the best thing to do is wait for the close to see what the technical indicators show us.
Market Direction Into The Close for November 21
I was far too conservative yesterday with my closing outlook as I felt the market had enough strength to hold around 1790. Today though the market direction pushed up to 1790 and then has drifted sideways since. 1790 is right around point B in my chart above. It is the open of Nov 19 and is the beginning of resistance by sellers who want to unload at least some of their positions or a portion of them. This is why the market direction higher continues to flounder. Many investors feel that the uptrend was very good but is stalled and they want to take some profits just in case the market direction will move lower.
Today I am expecting a green close. I will look at the technicals after the market closed to see if today’s bounce was simply that, just a bounce.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)