The market direction outlook for Wednesday was not based on oil prices but based on the technical picture combined with fundamentals of investor sentiment at the present time. The outlook for Wednesday was for a rally to be attempted for a second time since the failure of the rally on Tuesday set up Wednesday. But I indicated that the rally would fail. I did not however expect the failure would be so swift and strong. Much of the failure was on the back of oil declining still further, but as well technically the market does not have the advance numbers needed to stage any kind of sustained rally at this point. I indicated yesterday that a failure in the rally would result in the S&P falling to 2050. The drop to 2050 was met with lukewarm buying so the index fell through 2050 to hit 2036.53 before bouncing slightly to close at 2047.62.
Knowing in advance that the rally would fail made it easy to enter SDOW and Spy Put Options trades in the morning as the rally turned over. To answer those investors who wrote me early in the morning, it was the outlook for the failed rally that advised me not to buy the UDOW or spy calls as the rally started at the open of trading on Wednesday. However nimble investors could have bought and sold both the UDOW and Spy Calls for profits before 11:00 AM.
Index Closing Prices
The S&P closed at 2,047.62 down 15.07. The Dow Jones closed at 17,492.30 down 75.70. The NASDAQ closed at 5022.87 down 75.38. Considering how high the rally took the S&P and Dow Jones before they plunged, the losses today were actually quite large if we calculate the losses from their intraday highs. The NASDAQ was negative throughout the day and closed down more as a percentage than the other two indexes..
Advance Decline Numbers
Volume today reached 4.39 billion shares. By the close 46% of all volume was moving lower while 49% was moving higher. There were 151 new lows and 23 new highs. The number of new lows was half as many as we saw on Tuesday.
Market Direction Technical Indicators At The Close
Market Direction Technical Analysis for Dec 9 2015
Stock Chart Comments:
Probably the most important aspect of today’s chart is the move by the 50 day moving average to crossed up and over the 100 day moving average. This is a strong buy signal on the market but it may be too late. At any rate, the market is now set with the 50 day following by the 100 and 200 day moving averages which is exactly how the bull market is expected to appear.
The S&P closed below the 50 day moving average, the 20 day simple moving average (SMA) and above the 100 and 200 day moving averages. The closing candlestick is bearish for Thursday.
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 on numerous occasions. It remains resistance.
2075 is light support. Below that is 2050 which is light support. Stronger support is at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction. Stocks continue to have trouble holding the 2000 level.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support. 1920 is now light 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 better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August.
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: For momentum I use a 10 period when studying market direction. Momentum is negative and moving lower.
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 Friday Nov 10. The sell signal is gaining strength..
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 signal is negative and moving 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 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 is signaling down for Thursday.
Market Direction Outlook for Dec 10 2015
The market rebound rally failed during the morning and stocks pulled back hard on Wednesday. Unfortunately the technical indicators are all in agreement that stocks will continue to fall. This means once again that if there is a rally on Thursday, it will fail.
The next move in the market appears to be to head to 2025 and then 2000. By then I would expect investors to be back buying stocks. So on Thursday be prepared that while the outlook is lower, we could always see yet another attempt at a rally.
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