Tuesday’s outlook was for stocks to move lower as they continued to experience weakness. Part of the problem is the rising number of new lows versus new highs. The other part is the strength of specific stocks within the indexes themselves. We saw that today with the declines in IBM (down 5.86%) and United Technologies (down 7.03%) Stocks. After hours Apple and Microsoft stocks traded lower which could signal what kind of a day we should expect on Wednesday.
Advance Decline Numbers for July 21 2015
Volume ticked up slightly on Tuesday to 3.3 billion shares traded. 59% of those shares were being traded to the downside which is better than Monday’s 70% down.
New lows declined to 199 which was a strong pullback from yesterday’s 284. New lows fell to 68 from yesterday’s 107. What we are seeing is more stocks turning sideways but new lows have to fall a lot further for the market to move a lot higher. Right now that does not look promising.
Market Direction Closings For July 21 2015
The S&P closed at 2,119.21 down 9.07. The Dow closed at 17,919.29 down 181.12. The NASDAQ closed at 5,208.12 down 10.74
Market Direction Technical Indicators At The Close of July 21 2015
Let’s review the market direction technical indicators at the close of July 21 2015 on the S&P 500 and view the market direction outlook for July 22 2015.
Market Direction Technical Analysis for July 21 2015
Stock Chart Comments:
On Tuesday the most important aspects of the S&P chart were that the two prior warnings signals from Friday and Monday have now seen action. That could mean that Wednesday stocks stay weak and even fall a bit more but perhaps the market may attempt to recover. The other aspect is that the 20 day simple moving average (SMA) has refused to move back up throughout this rally but instead continues to trend sideways. It isn’t falling but it also is not rising. This could signal that stocks are still stuck in a sideways pattern.
Today’s decline to 2119.21 in the S&P does not remove the 2100 support level for the present rally. This is important for the rally to be able to continue.
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 is light support. 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 is positive but now turning lower.
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 July 14. The up signal was gaining strength but is starting to weaken.
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 falling and no longer overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal had changed to down on Monday but today the signal is still positive and is moving sideways. This could confirm the sideways pattern that the 20 day moving average is signaling. We need a few more days to be sure of the signal.
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 down for stocks and it is overbought.
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 and is also overbought.
Market Direction Outlook for July 22 2015
Stocks were quite overbought going into today. There had been two warning candlesticks that advised stocks would pullback. The 20 day trending sideways throughout this latest rally is not a good sign that the rally can keep pushing higher. The technical indicators now are 4 to 2 for stocks not falling much further. There are though plenty of signals from the technical indicators that stocks are going to be weak again on Wednesday. The after hours declines of Apple and Microsoft point to a further weakening of stocks on Wednesday but I would not expect another 200 point down day for the DOW. Moderate negative closes might be seen but if the number of new lows can decline on Wednesday we should not see to great a decline by the close. Wednesday’s outlook then is for more weakness and still lower or negative by the close.
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