The outlook for Friday was for stocks to move up right at the open, then some selling and then an attempt to close positive for the rest of the day. Stocks came close. There was a quick bounce at the open, some selling in the morning which took the S&P down to almost 2000 and then a huge rally back in the mid-afternoon which broke the morning opening high. It looked promising for the bulls, but after breaking the morning high in the mid-afternoon, investors were caught in a wave of selling and the market simply fell apart. The S&P crashed through the 2000 level on the way down and closed below it on heavy volume. All the major indexes followed including the Russell 2000.
Advance Decline for Jan 30 2015
Friday saw the heaviest volume of the month with almost 4.6 billion shares traded. The last hour alone saw investors flee as they realized the market was going to fall and break through the 2000 level. Throughout the day up volume lagged down volume but by the close 71% of all volume had been to the downside. New lows came in at 113 and new highs still reached 172, but the bears were in charge on Friday despite the mid-afternoon surge.
Market Direction Closings For Jan 30 2015
The S&P closed at 1,994.99 down 26.26. The Dow closed at 17,164.95 down 251.90. The NASDAQ closed at 4,635.24 down 48.17.
Market Direction Technical Indicators At The Close of Jan 30 2015
Let’s review the market direction technical indicators at the close of Jan 30 2015 on the S&P 500 and view the market direction outlook for Feb 2 2015.
SPX Market Direction Technical Analysis for Jan 30 2015
Stock Chart Comments:
The S&P fell in late afternoon in a spectacular plunge that left it below the 2000 level and above the 200 day exponential moving average (EMA). The Upper Bollinger Band is turning lower quickly and while the 50, 100 and 200 day moving averages are still trending sideways, the 20 day simple moving average (SMA) or Middle Bollinger Band is falling quickly as well. The 200 day moving average is down at around the 1975 level. Support though is down around 1970 so a break to the 200 level still looks quite probable.
Support and Resistance Levels:
These are the present support levels.
2075 was light support and is now resistance. Below that was 2050 which was light support and is now resistance. Stronger support is at 2000 but after repeated testing it gave way on Friday and while stocks could try to recover it on Monday, there is no strong catalyst to the upside at this time. The 2000 level will not hold in my opinion..
Weak support is at 1970. Stronger support is then at 1956.
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.
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 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 present.
Momentum: For Momentum I am using the 10 period. Momentum is slightly positive but more neutral than anything else.
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 Jan 28 and continues to move lower, gaining 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 negative and trending lower.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is trending lower and continues to point to further downside action.
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 also signaling down for stocks and is now oversold.
Market Direction Outlook and Strategy for Feb 2 2015
The morning could start with an attempt to regain the 2000 level. I would then expect further selling throughout Monday. The bias is lower. The outlook for much of last week had been for markets to move lower but twice it looked like the outlook was wrong. Instead, it now appears that the outlook is down, after all.
Investing Strategy Notes For Monday
I will have in the members forum investing strategy notes to prepare for Monday and the week ahead.
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