The unemployment numbers certainly got the ball to the downside rolling, but there were other issues as well. The biggest problem aside from oil is revenue numbers that while often decent, are not strong enough to push stocks a lot higher. That is keeping a lot of investors on the sidelines which makes the market more volatile.
Many investors are convinced the market has a lot more to fall and they are then planning on picking up stocks at much lower prices. If they are right, it will be one of the few bear markets in history that the majority of investors have guessed right.
Index Closing Prices
The indexes closed near their lows on Friday. The S&P closed at 1880.05 down 35.40. The Dow Jones closed at 16,204.97 down 211.61. The NASDAQ closed at 4,363.14 down 146.42
Advance Decline Numbers
Volume on Friday was still high at 4.93 billion. . By the close, 75% of all volume was moving to the downside. New lows came in at 169 which was an increase from Thursday’s new lows. New highs rose to 61.
With high volume and new lows reaching 169, you would have thought new lows would be much higher. The S&P did fall to 1872 before closing back at 1880, but new lows don’t reflect any kind of panic situation at present. The number of new lows were fairly subdued considering the decline to 1872. This could be telling investors that a rebound is around the corner.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Feb 5 2016
Stock Chart Comments:
The S&P closed below the 20 day simple moving average (SMA). The 50 day is continuing to fall away from the 100 day leaving the market with a strong sell signal as the 200 day leads the market presently. The Bollinger Bands Squeeze is continuing and is looking more like there could be a bit of a bounce and then a move lower.
The closing candlestick is again more bearish than bullish for Monday. The S&P dropped to the 1872 level but buyers stepped in once again and pushed the S&P to the 1880 level where traders were waiting to sell out of their positions.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. 2100 was light support. Stocks have been unable to stay above this level. It remains resistance.
2075 was light support and is also resistance. Below that is 2050 which was also light support and now 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 was light support and was retaken on Friday and reached again today. 1920 was light support and is back as resistance. 1900 is more symbolic than anything else.
1870 and 1840 have continued to support the market and the 1820 level is light support but again held up well in the sell-off of the last two weeks.
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 2011 plunge of 271 points for 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 is finished.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is negative.
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 Jan 28. The buy signal is poor again at the close on Friday.
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.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative and back moving sideways. The reading at the close was negative 5.54 which is unchanged from yesterday, indicating another sideways signal. There is no signal from the Rate Of Change that would indicate a bigger move lower is coming for Monday.
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 down 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 pointing down for stocks to start the week.
Market Direction Outlook for Feb 8 2016
Technically the S&P now has 5 negative signals and just MACD remains positive. However the rebound from 1870 was on fairly good volume and the number of new lows is not high considering how low the market moved. This is signaling that a rebound rally could be attempted on Monday but will fail even if it closes higher on Monday.
For Monday the market appears ready for a rebound rally attempt and then a move lower. If there is no rebound rally attempt in the morning, the market will fall to break 1870. That will bring in more sellers and push the market toward 1865 as a first price point where the market may stall the decline.
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