The outlook for Wednesday was for stocks to stage a bigger bounce which did occur. Now the question is whether this marks a bottom for the present sell-off or just a trap for bullish investors. Let’s look at Wednesday’s action to see if we can anticipate what to expect for Thursday.
Advance Decline Numbers for July 1 2015
Volume moved lower on Wednesday reaching just 3.7 billion shares. Of that volume 54% of all trades were up but new lows swamped new highs with 184 new lows and just 59 new highs. However this was a decline for new lows from Tuesday’s 229. New highs however more than doubled from Tuesday.
While volume still looks like it favors the bears, it actually is more supportive of bullish action on Wednesday.
Market Direction Closings For July 1 2015
The S&P closed at 2,077.42 up 14.31. The Dow closed at 17,757.91 up 138.40. The NASDAQ closed at 5013.12 up 26.26.
Market Direction Technical Indicators At The Close of July 1 2015
Let’s review the market direction technical indicators at the close of July 1 2015 on the S&P 500 and view the market direction outlook for July 2 2015.
Market Direction Technical Analysis for July 1 2015
Stock Chart Comments:
The rally pushed harder and higher today with the S&P well above the 200 day moving average and ready to take on the 100 day moving average. The 20 day simple moving average (SMA) is still turning lower however and there were some signs that the S&P is starting to tire just two days into the rally. The important 2075 support level was retaken on Wednesday.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have hardly changed in months as the market continues to move sideways.
2100 was light support and is now light resistance. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is 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 and bring to question whether the bull market is finished.
Momentum: For Momentum I am using the 10 period. Momentum remained negative 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 June 29 which was confirmed on Tuesday. That sell signal continued today.
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 deeply oversold and trying to bounce.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is negative but not falling which normally is a signal that there is not much downside at the present time in the index.
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 lower 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 also signaling lower for stocks but is on the verge of a possible buy signal for Thursday morning.
Market Direction Outlook for July 2 2015
Technically the market is looking stronger but there are still far too many sell signals in place to give even a small all clear signal. Thursday before the markets open we get the unemployment numbers. These numbers have been game changers for the S&P therefore it is tough to predict what the market will do following the unemployment report. At the present time I think markets will continue to recover.
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