The outlook for stocks on Tuesday was for stocks to commence a rally for at least a couple of days before moving lower. At the outset stocks fell back and then rallied hard on double the ordinary morning volume. But the rally failed and on even more volume investors dumped stocks pushing the S&P back below the important 2000 technical barrier. Volume was the largest I have recorded in over three years and new lows reached over 400.
Extended Edition
The market direction outlook tonight is extended for USA and Canada members. Tonight’s extended edition is 1800 words in length and will require 7 pages if printed. I felt this article was of importance for all members and as such I have posted it to both member sites. USA members can read the extended edition through this link or can join the USA member section here.
Canada members can read the extended edition through this link or join the Canada member section here.
Market Direction Closings For Dec 16 2014
The S&P closed at 1972.74 down 16.89. The Dow closed at 17,068.87 down 111.97. The NASDAQ closed at 4547.83 down 57.32.
Market Direction Technical Indicators At The Close of Dec 16 2014
Let’s review the market direction technical indicators at the close of Dec 16 2014 on the S&P 500 and view the market direction outlook for Dec 17 2014.
Market Direction Technical Analysis for Dec 16 2014
Stock Chart Comments: Stocks rallied and gave back the rally to close down below 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 but I am not expecting this to last. I believe the 100 day will cross up and over the 50 day and take the lead.
I explained yesterday that a close at the 100 day EMA almost always sees a rally which is what we saw on Tuesday. The give back in that rally, which should have lasted longer than a day, is setting up more downside action.
2000 is the highest level of decent support at present and while not strong, it did its job and slowed the recent decline including on Tuesday. 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. More on using the SPY ETF for the $175 level is in tonight’s extended edition.
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. You can see in the chart how negative the Rate Of Change was in mid-October before signaling a change back to up for stocks.
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.
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 stocks and is deeply oversold.
Market Direction Outlook and Strategy for Dec 17 2014
Tonight’s extended edition discusses in detail my outlook, what I am doing presently, how to protect and profit a portfolio as well as tips on cautionary investing. The outlook for Wednesday is caution following the failure of the rally on Tuesday. USA member can directly login through this link to review the extended edition. Canada members can read the extended edition through this link.
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