In my outlook for Thursday I had indicated I was expecting some weakness but a positive close. I did not though think investors would see another big up day. Just goes to show no one has the magic crystal ball. However the Market Direction Outlook was on the right side of the trade and that is all that really matters. I brought a lot of cash in to work on Thursday. It should be interesting to see what Friday brings and whether I can get into some more trades.
Advance Decline Numbers for Aug 27 2015
Total volume was very good today reached 5 billion shares with about a billion of those shares trading in the last hour. Obviously computer trading was active in the last hour. This could also account for the mid-afternoon drop and recovery. Of the volume traded 88% was to the upside. There were just 29 new lows and 5 new highs. This is a huge change for the new lows and indicates that a lot of the new lows have been picked up and moved higher.
Market Direction Technical Indicators At The Close of Aug 27 2015
Let’s review the market direction technical indicators at the close of Aug 27 2015 on the S&P 500 and view the market direction outlook for Aug 28 2015.
Market Direction Technical Analysis for Aug 27 2015
Stock Chart Comments:
The index on Thursday closed once again near the day’s high and well inside the Lower Bollinger Band. The 100 day is starting to lead the market although the 50 day has not fallen below it. Both the 50 and 100 day moving averages are falling toward the 200 day and the 20 day simple moving average (SMA) is continuing to fall. The index is nearing the 2000 valuation which will act as resistance and may stall the rally on Friday.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher.
2075 was light support. Below that was 2050 which is also was light support. Stronger support was at 2000 which has repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling last Friday.
Weak support was at 1970 while stronger support was at 1956 and technically it is was more important than 1970 for the market. 1920 and 1900 have very little if any support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up.
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 of 384.72 points or 18% from the all-time high of 2134.72. 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 aand trying to rise back up. In this collapse momentum was the worst it has been since 2011.
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 Aug 19. That sell signal remains strong on Thursday and is why protection should continue to be considered.
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 but is now rising from a deeply oversold indication.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative but trying to climb back. The reading three days ago was extremely negative which is almost always followed by a bounce. Today’s reading is still quite negative but it is rising but could still be indicative of further selling.
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 up for stocks and is oversold.
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.
Market Direction Outlook for August 28 2015
The technical indicators are improving but that also means the oversold condition that helped to create the bounce is no longer a major factor. In other words, the market must now stand on its own. After almost 1000 points in recovered in the Dow and the other indexes well off the correction lows, selling should be expected for Friday. While there could be a positive close it is my outlook that investors will not want to hold many positions over the weekend and will take profits on Friday. I am expecting a weak day.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)