The outlook for Monday was for stocks to move lower. In my comments on the weekend I indicated that if 2065 broke, the market would quickly fall to 2056 and then to 2050. Real support still lies down at 2000. The other levels are very light support and hold little chance of holding the market up should heavier selling hit the market. The problem on Monday was all the news out of China and Europe coupled with the declining oil prices and commodity prices. HBC indicated that The Chinese Purchasing Managers’ Index fell to 50 in November from 50.4 in October. While only a slight contraction the change to 50 which is on the cusp of turning negative was enough to worry investors. Meanwhile European manufacturing growth slowed again in November despite analysts who felt manufacturing was picking up. Turns out they were wrong. Finally in the US, manufacturing sector growth hit its lowest level in 10 months. All of this weighed on investors who decided to take some profits and move some cash to the sidelines.
SPX Intraday Market Direction to Dec 1 2014
Today’s intraday chart shows us that the opening saw an immediate plunge. I had not expected a plunge at the open but instead expected stocks to rally and then fall. A rally did follow the early sell-off and then a second sell-off pushed the index down to the critical 2050 level. This brought in investors who spent much of the day trading the index higher into the afternoon which is what I had expected in the outlook for Monday. Investors then sold the market lower into the close but kept it above 2050 for the entire afternoon and into the close.
SPX Intraday for Dec 1 2014
Advance Declines For Dec 1 2014
Volume on Monday jumped to 4.1 billion shares one of the heavier days in a couple of weeks. Down volume swamped up volume with 78% of shares trading lower. New lows hit 231 as energy stocks sank. New highs fell back to 120. The volume itself on such a down day shows the concern investors have for the market moving higher.
Market Direction Closings For Dec 1 2014
The S&P closed at 2053.44 down 14.12. The Dow closed at 17,776.80 down 51.44. The NASDAQ closed at 4727.35 down 64.28.
Market Direction Technical Indicators At The Close of Dec 1 2014
Let’s review the market direction technical indicators at the close of Dec 1 2014 on the S&P 500 and view the market direction outlook for Dec 2 2014.
Market Direction Technical Analysis for Dec 1 2014
Stock Chart Comments: The index on Friday had set a new all-time intraday high before closing lower. Today’s drop brings the SPX down to the Middle Bollinger Band. Tomorrow if the SPX closes below it, the developing Bollinger Bands Squeeze will send stocks lower. The 50 day is falling toward the 100 day and a couple of days of selling will push it below the 100 day issuing a sell signal on the market. The market fell today to 2050 and then closed back above it but 2050 remains critical for the present rally.
The support level at 2050 is light support and will not delay a fall for more than a few hours. 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 still positive but fell back quickly today.
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 October 22. Today however MACD issued a sell signal at the close. This has to be confirmed tomorrow before it becomes viable but the histogram itself is now negative.
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 after falling quickly on Friday and again today.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is moving lower indicating a change in the trend is 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 and it is overbought.
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 also overbought. The Fast Stochastic issued a strong sell signal at the close on Friday. Today’s closing signal is just as strong.
Market Direction Outlook and Strategy for Dec 2 2014
Technically the market is set to move lower on Tuesday. The remainder of my strategy will be in the members section along with the trades I will be entering next.
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