The Market Direction Outlook for Tuesday Apr 8 was for stocks to possibly pullback ahead of the Alcoa earnings on Wednesday but in general the bias was to the upside. Indeed most of the day stocks were higher but by late morning a decline in momentum to the upside set in which slowly eroded the advance. The late afternoon saw the market give back all the rally to close with slightly negative readings. The cause for the decline seemed to come from apparent “jitters” ahead of Wednesday’s Alcoa earnings along with word that oil inventories are higher than any estimates which seemed to stun a lot of investors who keep believing the bottom is in for the price of oil.
Advance Decline for Apr 7 2015
Volume on Tuesday was worse than Monday with just 3 billion shares traded a drop of 300 million shares. Down volume was 55% of all trades with up volume comprising 44%. However new highs came in at 94 which was a drop from Monday’s 132, but far above the new lows which were just 7. The advance decline numbers support the outlook for stocks to move higher but the number of new highs is terrible at just 95. For a rally to get moving, new highs should be close to 200, as a minimum.
Market Direction Closings For Apr 7 2015
The S&P closed at 2,076.33 down 4.29. The Dow closed at 17,875.42 down 5.43. The NASDAQ closed at 4,910.23 down 7.08.
Market Direction Technical Indicators At The Close of Apr 7 2015
Let’s review the market direction technical indicators at the close of Apr 7 2015 on the S&P 500 and view the market direction outlook for Apr 8 2015.
Market Direction Technical Analysis for Apr 8 2015
Stock Chart Comments:
The loss of the rally on Tuesday while disappointing was understandable ahead of the start of the next quarterly earnings. So many investors and analysts believe earnings are going to be poor that a pullback of this size was expected. Still the S&P managed to hold onto the 50 day moving average and close above the 2075 level, all of which point to the market probably attempting a resumption of the uptrend shortly.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. 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 recent pullback.
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.
Momentum: For Momentum I am using the 10 period. Momentum is negative and despite the drop today it stayed sideways which again indicates that not too much should be read into the “give-back” today.
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 sell signal on March 25. The sell signal is finally rising and could turn into a buy signal shortly.
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 negative and falling.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is back negative but continues to signal a change in trend to the upside may be about to happen.
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 now pointing up for stocks.
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 issued another up signal today but it did turn lower at the close reflecting the loss of today’s rally..
Market Direction Outlook for Apr 8 2015
The technical indicators have changed today with three indicators negative, one indicator neutral and just two indicators pointing higher. We are back to a fairly mixed outlook for stocks. The next quarterly earnings are being watched closely by investors and this highly anticipated event is front and center on Wednesday. I am expecting a fairly sideways day but the bias would seem to be slightly lower ahead of earnings. Alcoa releases their earnings after the close on Wednesday.
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