The give back of Thursday’s rally was unfortunate for the bulls but was not the first time this has happened this year. Lately the markets have given back many of the rallies started so today was just another example of a failed rally. The Weekly Initial Unemployment Insurance Claims numbers on Thursday were better than expected which once again seemed to surprise investors and analysts alike. If the rest of the globe is so slow, why is America continuing to create so many jobs? None of the analysts I listened to on Thursday had reasonable explanations for the continued strength in the jobs numbers. That started the day off negative.
Advance Decline Numbers for Aug 13 2015
Volume fell back to 3.2 billion shares traded with 62% of all volume to the downside. New lows came in at 122 while new highs were just 61. In general market breadth has been poor which often are signs of a stronger pullback yet to come. Whether we see such a pullback is anyone’s guess at the moment..
Market Direction Technical Indicators At The Close of Aug 13 2015
Let’s review the market direction technical indicators at the close of Aug 13 2015 on the S&P 500 and view the market direction outlook for Aug 14 2015.
Market Direction Technical Analysis for Aug 13 2015
Stock Chart Comments:
Looking at the chart you can clearly see that the S&P is making a pattern of lower highs. The lower lows pattern is not showing up yet but with stocks now trending sideways the bias is moving back to the downside. The 20 day is falling lower and the 50 day continues to slide toward the 100 day. The SPX meanwhile is trending below the 100 day moving average.
Support and Resistance Levels:
These are the present support and resistance levels and there are still no changes.
2100 is light support. Stocks will have to stay above it to change it back to solid 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: Momentum is negative and falling.
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 August 4 that was still growing to the downside on Thursday..
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 rising and nearing overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative and is pointing lower for stocks.
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 signaling down 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 has a weak buy signal in place but the readings are very weak.
Market Direction Outlook for August 14 2015
The give back of the rally today could set the market up for another attempt on Friday. This is something that has occurred often this year, however the technical indicators in general are weak to the upside but are growing stronger to the downside. Friday looks like a down day as weakness continues with stocks.
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