Market direction up which was established on Tuesday was severely hurt today by the heavy selling and fall of 1.43% in the S&P 500. All the indexes were hit hard. The S&P 500 is now just 13 points away from the important 1300 level which had been broken on May 18 but recovered on May 21.
While it is not unusual at all for the market indexes to retest their low of a recent correction, this correction is starting to look a bit wearisome for the index in general and may prove to be a serious market direction changer.
The S&P 500 like all the indexes is doing its best to hang onto the 200 day moving average but market direction is just not help. Today’s selling had brought it right back to the 200 day moving average again but this time it would appear there will not be as much support as previous.
Market Direction Chart For May 30 2012
You can see the technical damage done to the S&P 500 below. It is now at the point where it must hold the previous low and not break it. If it breaks the previous low the S&P 500 will fall quickly and probably with bigger point losses than previous seen.
Market Direction must hold the recent low otherwise it will fall quickly
Market Timing Technical Readings For May 30
Today’s market timing readings are actually not as bad as you might expect considering today’s selling. A number of them are undecided and one is still pointing to up while another is definitely indicating a sell signal.
Momentum is back falling lower and considering that it never managed to turn positive throughout this little rally, this has to be a very negative indication indeed.
MACD or Moving Average Convergence / Divergence is actually flat or pretty well undecided. This too is negative since it has also not turned positive throughout this latest rally.
The Ultimate Oscillator had turned positive and still us but it is now falling back.
Rate of Change which flashed a sell signal many sessions back is still negative and turning lower.
The Slow Stochastic is the only technical tool that is still positive despite today’s selling. However it tends to look out beyond the next few days so perhaps it is telling us that this latest selling was overdone.
The fast stochastic though is definitely now bearish and has flashed another sell signal.
With so many indicators negative or turning negative the market direction call has to be for a continuation of the move lower.
Market timing tools for May 30 2012 are somewhat undecided
Market Direction Summary
A lot of technical damage was done today to all three markets. The Dow is now almost 600 points below 13000. While we can hope that the market hangs on here and we finally get some good news out of Europe investors need to think about what it will take to push the market direction back up. As stock prices erode daily, eventually buyers will move a lot lower because there must be a reason for stocks to move higher. If the next round of earnings begins to show any hint of a decline, market direction will fall rapidly.
Overall the reality is investors should be prepared for the S&P to retest the most recent market low and if it should break which it would appear likely, it will be a case of where does the next support level rest for the S&P 500.