Overseas the Chinese and European markets moved lower ahead of our opening on Monday setting the stage for a decline on Monday. That, coupled with a decline in the price of oil took stocks lower on lower volume.
Advance Decline Numbers
Volume on Monday was very low at 2.47 billion shares traded with the Christmas holiday taking most of the volume out of the market on Monday. 74% of the volume was to the downside. New highs rose to 30 by the close and new lows dropped to 24, the lowest number in weeks. 60% of stocks were declining.
Market Indexes Closing Numbers
All indexes closed well off their lows on Monday. The S&P closed at 2,056.50 down 4.49 amd still above the 2050 support level. The Dow Jones closed at 17,528.27 down 23.90. The NASDAQ closed at 5,040.99 down 7.51.
Market Direction Technical Indicators At The Close
SPX market direction technical analysis for Dec 28 2015
Stock Chart Comments:
Monday saw the market start off quite weak. The rest of the day was spent with stocks trying to recover and finally closing well off their lows but still negative. The S&P closed back below the 50 day simple moving average (SMA) but above both the 100 and 200 day moving averages.
The 200 day moving average is still above the 100 day signaling a long-term sell signal on the market. This longer-term sell signal has been in place since early September. The 50 dy though has recovered to be back leading the market but it is turning lower.
Support and Resistance Levels:
These are the present support and resistance levels. Almost since the start of this year, these support levels have not changed. That is unusual for the stock market and is the first time since I started investing in the early 1970’s that the same support levels have been referred to for an entire year.
2100 was light support. Stocks have been unable to stay above this level and push higher on numerous occasions. It remains resistance.
2075 was light support. Below that is 2050 which was also 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 was still positive on Monday despite the selling.
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. Today MACD issued a buy signal which has to be confirmed.
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 positive and overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and falling back.
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 up 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 up for stocks but took a sharp turn lower today by the close.
Market Direction Outlook for Dec 29 2015
Tuesday’s opening should see stocks try to build on today’s recovery but I am expecting that push higher to fail in the morning and stocks to fall back negative. The afternoon however could see stocks try once again to move higher. The so-called Santa Claus Rally is poor to date, which does not bode well for the rest of the week. Right now then Santa looks like he may be delayed.
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