Stocks this morning are showing their true direction. Thursday’s sell-off simply drew in traders who looked at the big sell-off as a technical strong point to host a rally and make some profits, but the volume, on Friday betrayed the true nature of the market direction. With only 16 new highs on Friday but 141 new lows, you could tell that the underlying movement was lower. Basically then a lot of investors used Friday to unload positions and raise cash levels.
Market Direction SPX Morning Chart
The one minute chart for this morning shows us that the Bollinger Bands Squeeze is long gone and the market direction is clearly lower. On bounces I will be adding to my spy put positions. The market direction portfolio is already established for more downside movement.
This morning’s open set a new low of 1964.04 in this latest correction in the market. There is no doubt in my opinion that the market will fall through the 100 day EMA early this week and then we can reassess. If the 1930 level should break either late this week or into next, which is the low valuations from the last correction, then stocks should try to challenge the 200 day exponential moving average (EMA) which would be a correction of about 119 points or about 5.8%.
The trend lower has more room to fall as seen by the Lower Bollinger Band continuing to fall and the candlesticks moving right along the Lower Bollinger Band and breaking through it at times, such as this morning’s open.
Market Direction Morning Technical Outlook
Momentum
The morning chart below which compares today so far (as of 10:00 AM) with prior days since the end of July shows that momentum is moving lower but not at the depths of the sell-off on Thursday last week. If stocks are to really fall hard, momentum will pick up and surpass the spike lower last week.
MACD
MACD is continuing to push to more negative readings and no bounce back is expected yet. Meanwhile the MACD histogram, which is the gray chart beneath the MACD signal lines showed us that on Friday while the market was rallying the histogram was not but was actually declining. That was another clue there would be more selling today.
Ultimate Oscillator
The Ultimate Oscillator is turning back down but is not oversold which means the market has room to fall lower.
Rate Of Change
Finally, the Rate Of Change indicator shows lots of room to fall until we get so negative that the market will bounce back.
Market Direction morning for Sep 29 2014
Lower Open Will See Spikes
Today’s open saw a big move lower so I am expecting a rally attempt mid-morning. That will be my opportunity to add in more spy put options. I will be widening the stop-loss on the market direction portfolio so as not to be taken out on any mid-morning spike attempt.
SPX Market Direction Outlook Into The Afternoon
Into the afternoon the market direction should break below 1965. There will be small spikes as investors trade positions, but overall my trades are primarily set for more downside action.
I will update the market direction outlook around the noon hour.
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