The outlook for stocks for Friday was for more weakness although I felt it best to stay cautious and watch the market until mid-morning. Losses though were expected to be small. Looking at the one minute chart below you can see that by mid-morning the market had topped around 11:00 AM. It tried twice more to push higher but both met with sellers. That commenced a decline about midway through the lunch hour. The decline last right into the close although there was some last minute buying which pushed the index up from its lows of 2102 to close at 2103.84. Often this year when the market closes at or very close to the low, the next day sees the market bounce back.
Intraday Chart July 31 2015
Advance Decline Numbers for July 31 2015
Volume sank on Friday to 3.7 billion shares traded in New York. New highs though rose to 110 and new lows ended at 71. Despite the market ending lower for the day, advancing issues outnumbered declining issues with 61% of all stocks advancing. Down volume made up 52% of all shares traded so basically down and up volume were fairly close. None of these numbers point to anything at this point to be concerned about. The day on Friday was actually fairly bullish.
Market Direction Closings For July 31 2015
The S&P closed at 2,103.84 down 4.79. The Dow closed at 17,689.86 down 56.12. The NASDAQ closed at 5,128.28 down just 0.50.
Market Direction Technical Indicators At The Close of July 31 2015
Let’s review the market direction technical indicators at the close of July 31 2015 on the S&P 500 and view the market direction outlook for Aug 3 2015.
Market Direction Technical Analysis for July 31 2014
Stock Chart Comments:
Nothing much new to report for the stock chart itself. The 20 day is still trying to size and it almost ready to pushed above the day moving average. This would be a good signal that the S&P will move higher. The 2100 level was still held on Friday and stocks did not fall that low.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have hardly changed in months as the market continues to move sideways.
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.
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 July 30 but did not confirm the signal on Friday.
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 back to a positive and rising.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal jumped on Wednesday and started to turn back down on Thursday. It continued to move lower on Friday.
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 up for stocks but is moving sideways.
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 signaling up for stocks but it is turning lower and could signal down on Monday is stocks head lower.
Market Direction Outlook for August 3 2015
It is a tough call for Monday August 3. This is the start of the poorest performing month of the year. The first couple of weeks of August are often quite poor. Yet on Friday the number of stocks advancing was high considering the index was falling lower. Technically the outlook is poor. MACD refused to confirm Thursday’s buy signal and the rate of change and Fast Stochastic are turning back down. Momentum has stayed weak. In general these kinds of indicators usually point to more downside ahead for stocks.
On Friday though, stocks bounced right at the close. It was not much of a bounce so in general stocks closed near the lows for the day. Usually this signals a bounce for the next day, or at least the opening or morning.
Monday then looks like it could start with a jump but then turn sideways and in general move lower. The biggest problem with that outlook is the number of stocks advancing on Friday outnumbered the number of stocks declining and almost always that points to more upside ahead for stocks. Monday is pivotal. If stocks cannot get moving back up then they will fall and break through 2100 which should set the stage for more selling by investors. Right now I think Monday will close slightly negative which may set up Tuesday for more downside action. Let’s see how Monday fares.
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