Thursday’s drop on light volume was disappointing but again oil was the primary culprit. As well often the final day of the year sees a degree of tax selling to take profits or losses and setup for the new year.
Advance Decline Numbers
Volume on Thursday was actually higher than Wednesday with 2.6 billion shares traded on New York. 59% of all trades were to the downside while 38% was to the upside. 60% of all stocks on New York were falling. New highs fell back to just 9 and new lows crept forward to 47.
Market Indexes Closing Numbers
All indexes closed almost at their lows. The S&P closed at 2,043.94 down 19.42 and back below the 2050 light support level. The Dow Jones closed at 17,425.03 down 178.84. The NASDAQ closed at 5,007.41 down 58.43 and on the verge of falling back below 5000 again. 5000 has been a tough level for the NASDAQ to hold throughout 2015.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Dec 31 2015
Stock Chart Comments:
The final trading day of the year was poor with the S&P closing below all major moving averages once again. As well the 200 day moving average is continuing to rest above the 100 day and there are no indications this will change anytime soon. The 20 day simple moving average (SMA) has fallen below the 200 day and may fall below the 100 day this week which would be a sell signal.
The only good thing the chart shows is that the S&P is still holding the low from Dec 28 and Dec 23. The closing candlestick was bearish.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015. That is unusual for the stock market and is the first time since I started investing in the early 1970′s that the same support levels have been referred to for what is now more than an entire year.
2100 was light support. Stocks have been unable to stay above this level. It remains resistance.
2075 was light support. Below that is 2050 which was also light support. Stronger support is at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction in August and September. Stocks continue to have trouble holding above the 2000 level since the August 2015 correction.
Weak support is at 1970 while stronger support is at 1956 and technically it is more important than 1970 for the market. 1940 is light support. 1920 is light support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August 2015.
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 all-time high of 2134.72. This would be the biggest correction since April 2012. 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 turned negative on Thursday.
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 Dec 28. On Thursday the buy signal was weaker.
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 signal is negative and falling back.
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 issued a sell signal on Thursday.
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 issued a sell signal on Thursday.
Market Direction Outlook for Jan 4 2016
2015 ended with a slight loss for the S&P and Dow. The NASDAQ on the other hand closed with a slight profit.
Technically the indicators have moved from being positive on the market to generally having a growing negative trend. 5 indicators are negative and two, the stochastic indicators, have issued sell signals. MACD is still holding its buy signal, but the signal is weaker.
Overall I had expected a rally for the start of 2016 but the indicators are advising that will not be the case. Look for weakness on Monday and an end to any chance for the highly expected Santa Claus Rally. If Monday’s open is higher than Thursday’s close of 2043.94 there is still the chance of a rally developing.
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