The market direction outlook for the S&P for Tuesday April 21 was for a bounce at the open and then weakness. I had indicated for today’s Market Direction Outlook that “For Tuesday, stocks look like they may try to rally at the start but then move lower into the lunch hour. The close may surprise either way but in general the technical indicators are biased more to the downside.” I also indicated that I was not anticipating any large move lower, just weakness.
In the end that is what investors saw as the morning started with a bounce but then stocks moved lower but by the close they were just below the 2100 level on the S&P. The Dow was down 85 points but the NASDAQ closed up 19 points and back above 5000 at 5014.
Earnings Disappointment Weighs On Markets
Meanwhile 4 companies in particular hurt the indexes. DuPont Stock, IBM stock , Travelers stock and Under Armour Stock pulled back on disappointing revenue and earnings numbers. So far, average revenue numbers are down around 2 percent for the S&P stocks that have reported results. Most claim currency exchange as the prime culprit but there are some signs that global sales for many companies are soft. Even with reduced revenue expectations from analysts, only 42.2% of all companies who have reported quarterly results have managed to meet or exceed what are often reduced numbers. In order for the Indexes to move convincingly higher and stay higher revenue numbers have to increase or basically investors are simply pushing up price to earnings and cash flow to earnings multiples to above normal levels which is often the precursor to larger corrections. At present this is not the case and stocks are staying under pressure as most investors appear to understand that revenue numbers are weak.
Advance Decline for Apr 21 2015
Volume rose by 250 million shares on Tuesday with 3.2 billion shares traded. Of those shares 62% were being traded to the downside. However advancing issues were 49% of all trades while declining issues were 48%. New highs came in at 80 and new lows at just 12. While the decline percentage seemed higher on Tuesday, the number of new lows still points to a market that is not planning on falling much at the present time.
Market Direction Closings For Apr 21 2015
The S&P closed at 2097.29 down 3.11. The Dow closed at 17,949.59 down 85.34. The NASDAQ closed at 5014.10 up 19.50.
Market Direction Technical Indicators At The Close of Apr 21 2015
Let’s review the market direction technical indicators at the close of Apr 21 2015 on the S&P 500 and view the market direction outlook for Apr 22 2015.
SPX Market Direction Technical Analysis for Apr 21 2015
Stock Chart Comments:
Yesterday’s rally was tested a bit today but two items are important. The first is that the 20 day simple moving average (SMA) is continuing to fall below the 50 day simple moving average (SMA) despite the market rally. The last time this happened was Jan 21 and within two days the market was falling.
The second is the S&P selling lower and then recovering again today but failing to recover 2100. Still the pullback today was slight but if it continues on Wednesday it will most likely set in place another failed high. At present that does not appear to be the case and I am not anticipating the market will commence to pullback, but the technical indicators are not so sure.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. Stocks will have to stay above it to change it back to support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is at 1956.
1870 and 1840 are both levels with strong enough support to delay the market falling and should see a sideways action attempt while investors decide whether to sell or buy.
The other two support levels 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 from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors and bring to question whether the bull market is finished.
Momentum: For Momentum I am using the 10 period. Momentum is positive but did not participate in Monday’s big rally and today is still trending more sideways than up or down.
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 buy signal on Apr 9 and that signal continues to be slowly eroded. .
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 is barely positive and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change continues to indicate that the next move for stocks will be lower. It has now turned negative and is pointing lower.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day. The slow stochastic is pointing down for stocks for the next couple of days..
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 pointing up for stocks and a possible buy signal on Monday looks ready to turn back to a sell signal.
Market Direction Outlook for Apr 22 2015
The bias for Tuesday after Monday’s big run-up was lower. The technical indicators are continuing on Tuesday to point lower in general for stocks on Wednesday. The few positive indicators are still moving lower and most are ready to turn negative if any more selling erupts. However the losses on Tuesday were minor and the strength of the NASDAQ as we head into more tech earnings is encouraging for bulls.
Stocks have more earnings yet to come this week. More revenue misses and stocks are bound to move lower as investors sell out of positions. This is providing the caution signal but as long as the SPX holds around 2100 this period of weakness will end up being an opportunity to place more capital to work for the next move higher.
Presently though it is questionable whether stocks can move much higher. While 2100 can certainly be retaken by the S&P the problem will be holding it and moving higher.
The revenue numbers from the majority of companies that have reported quarterly results so far do not justify stocks moving much higher. This is why caution is the best signal to be aware of.
For Wednesday, stocks look ready to try to recover at the open but then once again turn weak. Even if the close on Wednesday is positive, the outlook remains for continued weakness to plague stocks at the present time.
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