The outlook for Tuesday was for stocks to attempts a rally after the earnings and forward guidance from Alcoa on Monday after the market closed but technically stocks remained weak and would most likely move lower. It was a wild day for stocks on Tuesday which ended poorly but at least off the lows of the mid-afternoon plunge.
Advance Decline for Jan 13 2015
Volume jumped to 4.1 billion on Tuesday with 63% of that volume to the downside and 35% to the upside. Interestingly new highs came in at 193 almost breaking into the 200 to 250 range which is important for a rally to be sustained. New lows jumped as well, rising to 130.
Technically it was a mixed day for advancers and decliners.
Market Direction Closings For Jan 13 2015
The S&P closed at 2,023.03 down 5.23. The Dow closed at 17,613.68 down 27.16. The NASDAQ closed at 4,661.50 down just 3.21.
Market Direction Technical Indicators At The Close of Jan 13 2015
Let’s review the market direction technical indicators at the close of Jan 13 2015 on the S&P 500 and view the market direction outlook for Jan 14 2015.
Market Direction Technical Analysis for Jan 13 2015
Stock Chart Comments: Stocks today pushed higher and then saw the entire rally collapse and turn negative. Never a good sign, these kinds of reversal days sometimes see stocks recover within a few days and actually move higher. Whether this will happen here is a tough call. Stocks closed well off their lows but the S&P broke the 2050 level again and managed to cling to the 2020 level but not the 2025. The 20 day SMA is still hanging on to the 50 day SMA and not falling further. Stocks closed below the 50 day but while they broke through the 100 day during the plunge, they still closed above it.
Support Levels:
These are the present support levels.
2075 was very light support and broke easily in the recent downturn. Below that was 2050 which was light support. Stronger support is at 2000 which could delay a fall perhaps a day or two at the most and weak support is found at 1970. Stronger support is then at 1956 which should delay a further pullback again by at least a day.
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 this time.
Momentum: For Momentum I am using the 10 period. 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 sell signal on Jan 5. MACD continues to be 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 and sideways as it tries to rise.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is showing that the trend is back up is in jeopardy although there is a slight uptick in the reading despite the dramatic collapse of the rally.
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 signaling down for stocks as well.
Market Direction Outlook and Strategy for Jan 14 2015
Technically the indicators are negative and most are pointing to lower prices. The “give-back” of today’s big rally has not helped the technical indicators any. The outlook for Wednesday remains for stocks to test the 2000 level.
There are signs though that another bounce attempt may be in the works. While stocks lost the full rally, they closed well off their lows and the number of new highs today is close to 200 which we need to see, if the market will push higher.
Therefore we could see a bounce attempt tomorrow in the morning at some point and then a move back lower. 2000 continues to support the market but stocks look like they want to test it.
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