I had thought we would see a bit better rebound attempt in the morning, although at one point the DOW was up 80 points. Still though the plunged to 2000 was not unexpected and it held up despite 3 attempts to break through. The 2000 level can hold for probably one more day but volume has to improve to the upside although for a short period in the afternoon, volume did pick up as investors managed to push back and even the DOW managed to move up to about 30 point down before falling again into the close.
Advance Decline for Jan 6 2015
Volume picked up against on Tuesday with 3.1 billion shares traded to the downside and 1.2 billion to the upside. There were 129 new highs but also 127 new lows.This brought today’s total to 4.3 billion shares up from yesterday’s 3.8 billion. The indexes were all over the place as volume in the mid-morning picked up heavily and when 2000 broke on the S&P investors started selling again. It was good to see new highs rise today to 129 but they need to get back up over 200 or 250 to dry up a lot of the selling.
Market Direction Closings For Jan 6 2015
The S&P closed at 2002.61 down 17.97. The Dow closed at 17,371.64 down 130.01. The NASDAQ closed at 4,592.74 down 59.84
Market Direction Technical Indicators At The Close of Jan 6 2015
Let’s review the market direction technical indicators at the close of Jan 6 2015 on the S&P 500 and view the market direction outlook for Jan 7 2015.
Market Direction Technical Analysis for Jan 06 2015
Stock Chart Comments: Stocks today broke through the 100 day exponential moving average (EMA) as they moved quickly to 2000 once the early morning rally failed. Selling intensified at the 2000 level but in the end the support line held. The 20 day SMA is now turning lower and preparing to cross down and over the 50 day simple moving average (SMA) which will signal more downside.
Support Levels:
These are the present support levels.
2075 was very light support and broke easily last week. Below that was 2050 which was light support and broke today after two days of testing. 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 again 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 and took quite a tumble lower today.
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 and confirmed that sell signal today. The reading is strongly 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 deeply oversold.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is showing that the downturn is well underway.
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 the move down for stocks should continue.
Market Direction Outlook and Strategy for Jan 7 2015
Technically all the indicators are now aligned pointing to more downside for stocks, but such a deeply oversold condition should see a better rally than we saw today. Unfortunately the afternoon rally did not have much strength and while it was inspiring to watch the DOW fight back from being down over 200 points, in the end, the DOW still closed down 130 points.
2000 should hold for one more day and that could be all the market needs for a bounce back. Factory orders dropped 0.7% which was slightly more than an expected 0.6% and many analysts pointed to the poorer than expected number as a sign the global economies are slowing. Indeed talk from Europe about a Quantitative Easing program and what it might do didn’t seem to jolt anyone into buying equities.
Statistically this has been the worst start to a New Year since, well forever, according to CNBC. I know I can’t recall a worst start to a New Year. Remember the theory, that the first 5 trading days set the tempo for the rest of the year. Keep cash available and have patience as the market tries to sort out where it is going next.
The big number to watch this week will be the unemployment report. This week it could be a real game changer but hopefully to the upside. Stocks look very weak but a rebound rally appears set for Wednesday. If not, then watch for the 2000 level to break and the market to begin another leg down until it reaches soft support at 1970.
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