Whomever coined the phrase “to live in interesting times…” should have been an investor. Today was a real surprise. With indications from yesterday’s recovery rally that stocks were going to move higher, investors sold on the news that OPEC was warning of weak oil demand for 2015. Europe started the selling, worried that the weak oil demand pointed to a probably global slowdown. North American stock markets picked up the sentiment and ran with it.
Selling was at times intense with the S&P halfways between two support levels at the close. Let’s take a look at today’s action.
Advance Declines For Dec 10 2014
I have been warning for days that the new lows are too high. Today was even worse with new lows at 260 and new highs at 107. Volume was hhigher again today at 4. billion shares and 94% of all volume was down. The bears took today and unless new lows fall back to 30 and below, the market direction up is in big trouble..
Market Direction Closings For Dec 10 2014
The S&P closed at 2026.14 down 33.68. The Dow closed at 17,533.15 down 268.05. The NASDAQ closed at 4684.03 down 82.44.
Market Direction Technical Indicators At The Close of Dec 10 2014
Let’s review the market direction technical indicators at the close of Dec 10 2014 on the S&P 500 and view the market direction outlook for Dec 11 2014.
Market Direction Technical Analysis for Dec 10 2014
Stock Chart Comments: The chart today showed that the SPX is now well below the 20 day moving average. The Bollinger Bands Squeeze continues to take shape and candlesticks still appear ready to break lower despite Tuesday’s action. 2050 broke today easily and now 2000 looms ahead. The market should fall back to 2000 easily now. The 50 day appears nearing the point of crossing down and over the 100 day signaling a correction for stocks.
2000 is the highest level of decent support at present and while not strong, it should have enough strength to hold sellers back for at least a day in the event of an interim pullback. If 2050 should break, stocks will collapse back to 2000 in very quick order. The next level after 2000 is at 1970 and then 1956.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating at this time.
Momentum: For Momentum I am using the 10 period. 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 Dec 1. MACD continues negative and is building strength to the downside.
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 turned negative today..
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is moving lower indicating the trend change is still underway.
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 market direction is down.
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 a very strong down day tomorrow for stocks. It is oversold.
Market Direction Outlook and Strategy for Dec 11 2014
As explained yesterday the number of new lows is far too high and has been for days. Investors have sold out of the market over a period of days now but today a lot more investors joined them. Volume of 94% down is getting to a panic stage so it is surprising the downside was not greater.
While yesterday the outlook look good for a resumption back up, the market today looks ready to tumble lower. For Thursday even if we get good number for the Weekly Initial Unemployment Insurance Claims, the market might rally, but the direction is lower. Whether we move higher on Thursday does not matter at present. Investor sentiment is poor and even with December, any rally is suspect. As indicated I would expect some kind of rally attempt but a lower close. If not a lower close on Thursday, we should see one on Friday.
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