The outlook for stocks on Monday was for a rebound to start the day off and then a lower close. There were various problems though on Monday which affected stocks. The decline in oil remains the number one concern for investors at present. Today the UAE stunned analysts and investors by indicating that OPEC would not change production levels even if oil fell to $40 a barrel. It wasn’t the production levels comment that stayed with investors. It was the $40 a barrel statement.
On top of the continuing slide today, gold sold off as investors look to the Fed meeting this week on interest rates. While I am not expecting any change or surprise announcement a lot of investors remain nervous that interest rates may rise sooner than spring which remains the consensus among most analysts. Personally I am not expecting interest rates to rise in the spring.
SPX Intraday One Minute Chart
Today’s one minute chart shows the gap up open which resulted in selling within a few minutes after the rally. The decline in stocks lasted through until the noon hour and took out both the 2000 support level and 1990. The afternoon saw investors push back a little, but the buy the dip investors were no where to be found. Stocks rose and traded between 1990 and 2000 but kept sliding back to the 1990 level where they closed the day.
SPX intraday chart to Dec 15 2014
Advance Declines For Dec 15 2014
Monday saw still heavier volume than Friday with 4.3 billion shares traded an increase of 100 million shares. 80% of volume was to the downside while 19% was to the upside. These were almost the same percentages as on Friday. Meanwhile there were just 28 new highs but 354 new lows. Monday was another win for the bears.
Market Direction Closings For Dec 15 2014
The S&P closed at 1989.63 down 12.70. The Dow closed at 17,180.84 down 99.99. The NASDAQ closed at 4605.16 down 48.44.
Market Direction Technical Indicators At The Close of Dec 15 2014
Let’s review the market direction technical indicators at the close of Dec 15 2014 on the S&P 500 and view the market direction outlook for Dec 16 2014.
Market Direction Technical Analysis for Dec 15 2014
Stock Chart Comments: Stocks closed below the 50 day moving average and at the 100 day exponential moving average (EMA). The gap between the 100 day and 50 day moving averages is starting to widen as the 50 day is trying to push up and away from the 100 day. The close today down at the 100 day EMA is a result of the gap being so narrow between the two moving averages. Almost always a close down at the 100 day EMA will result in a rebound rally. The SPX closed below the 2000 technical support level for the first time in the present downturn.
2000 is the highest level of decent support at present and while not strong, it did its job and slowed the decline both on Friday and today. 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 more 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 is deeply oversold.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is moving lower and into negative readings. It continues to suggest that stocks will fall still lower before any serious uptrend occurs. However the move lower for the Rate Of Change is not very pronounced which often suggests that a pullback will be slight and not very deep. With the S&P now down 4.3% at today’s close, the Rate Of Change may be indicating that this will be the extent of the decline.
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 and it is deeply oversold. It is however trending sideways and looks ready to bounce..
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 Tuesday and is deeply oversold. However it is trying to bounce back up.
Market Direction Outlook and Strategy for Dec 16 2014
The outlook on Tuesday for the S&P is for the market to probably rebound or bounce back before more selling can resume. The technical indicators are deeply oversold and while there is room for the indicators to fall further, most of them are deeply oversold and have been for several days. Stocks look set to rally on Tuesday.
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