It is amazing how even a single word can move the market. Iran’s oil minister calling the Saudi-Russian oil output freeze “ridiculous” was enough to send stocks into a tail spin. What is strange is that just about every analyst speaking on oil had term the arrangement exactly the same. In other news the Case-Schiller housing prices showed a 5.7% growth over the past 12 months and to the downside consumer confidence fell to its lowest level in 7 months falling to 92.2 for February versus January’s 97.8 measure. Despite this usually any number above 90 is considered robust.
Index Closing Prices
The indexes closed just above the day’s lows. The S&P closed at 1,921.27 down 24.23 giving back almost all of Monday’s rally. The Dow Jones closed at 16,431.78 down 188.88 but 40 points shy of losing Monday’s rally. The NASDAQ closed at 4,503.58 down 67.02 and wiping out all of Monday’s rally.
Advance Decline Numbers
Volume on fell back to 3.9 billion shares, lower than yesterday’s volume which was also quite low. By the close, 78% of all volume was moving to the downside. 65% of all stocks on New York were falling. New highs still outpaced new lows at 41 new highs and 26 new lows. New highs outpaced new lows for only the fifth time this year.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Feb 23 2016
Stock Chart Comments:
Not a great deal to report this evening as basically most of Monday’s rally was lost. This left the S&P back below 1925 at 1921.27 but during the day the 1920 level was tested and held at 1919.44.
The S&P is still below the 50 day moving average but remains above the 20 day moving average. The 200 and 100 day moving averages are continuing to lead the market and are showing no signs of changing direction. They continue to point down.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015.
2100 is resistance.
2075 was light support and is also resistance. Below that is 2050 which is also resistance.
Stronger support was at 2000 which is now resistance.
Weak resistance is at 1970 while stronger resistance is at 1956 and technically it is more important than 1970 for the market. 1940 is light resistance as was 1920 which is now support. 1900 is more symbolic than anything else.
1870 is support. 1840 continues to be support. The 1820 level is light support. The strongest support level is at 1800.
1775 and 1750 are both 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 all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive and did not take much of a hit today at all despite the selling. That will change tomorrow if the selling continues.
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 Feb 16 which is still strong.
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 falling back away from an overbought signal.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but fell to 0.75 indicating that the rally has stalled but the overbought condition is quickly evaporating.
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 pointing up for stocks. It is overbought and could change to a down signal with any selling on Wednesday..
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 pointing down for stocks. It is overbought.
Market Direction Outlook for Feb 24 2016
For Wednesday Feb 24 the technical indicators have changed. We now have one down signal, one up signal that is so weak it could change to down easily and 4 signals that signal that the selling on Tuesday was overdone.
The connection to oil remains the focus of investors. The constant analysis among oil traders and investors of oil reaching $50 or $60 by year-end does not help the market at this point. Fundamentally investors need to see real evidence of a decline in production or a decline in supply and a rise in demand. That is the only thing that will change the price of oil in a more permanent way to assist stocks to stabilize. That may not happen until into the spring period so volatility will be with stocks for some time to come.
The technical indicators are still pointing to the bullish side of the market. Wednesday then looks still bullish but the closing candlestick on Tuesday warns of any day of selling still to come.
So we have a very mixed outlook for Wednesday with a probable bias slightly to the upside.
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