For a short while in the morning I thought I might have beaten the technical indicators in the Market Direction Outlook. My outlook was for a bit of a bounce and we got a bounce for a time. The technical indicators though said “lower” and in the end they were right. There were a number of factors including the plunge in oil and an increase in oil inventories that is the biggest in 80 years (oil will obviously move lower), but the big game changer was the Fed minutes which investors took to mean that interest rates would rise this year and probably by spring. That sent stocks tumbling. Let’s take a look.
Advance Decline for Jan 28 2015
VAlmost 4.1 billion shares traded on Wednesday. Down volume was 89%. Interestingly there were 293 new highs and 98 new lows. The new highs though were primarily in the morning and into the lunch hour. At that point volume was more mixed. The volume though spiked after the Fed comments and stocks collapse as sellers rushed in. So while the number of new highs is impressive and shows that a lot of buying was going on, the day belonged to the bears by the end. 293 new highs is among the higher readings in over a month. Too bad investors decided to sell the afternoon away.
Market Direction Closings For Jan 28 2015
The S&P closed at 2,002.16 down 27.39 which is almost identical to Tuesday’s fall. The Dow closed at 17,191.37 down 195.84 making the past 2 days a loss of 486 points. . The NASDAQ closed at 4,637.99 down 43.50 after being up for much of the day thanks to Apple Stock.
Market Direction Technical Indicators At The Close of Jan 28 2015
Let’s review the market direction technical indicators at the close of Jan 28 2015 on the S&P 500 and view the market direction outlook for Jan 29 2015.
Market Direction Technical Analysis for Jan 28 2015
Stock Chart Comments:
The S&P fell below the 100 day today and is sitting within 2 points of the 2000 support level. This level has held the market up for weeks. In my opinion it will break tomorrow and I am not expecting the market to recover 2000 tomorrow or Friday. I believe the market wants to test 1970.
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.
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 neutral.
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 Wednesday which must be confirmed on Thursday. I believe it will 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 negative and falling.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is trending lower which was signaling a probable change in market direction. The reading today is strong enough to signal a change to down.
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.
Market Direction Outlook and Strategy for Jan 29 2015
Despite the earnings from Apple, Yahoo, AT&T and others, the market is heading lower. Technically all the indicators are pointing to further weakness. The next stop is probably 1970 and as it is light support, I would expect only a few hours of being able to hold any kind of determined selling in place.
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