The outlook for Monday for the Market Direction was for stocks to decline. The choice was obvious based on the No Vote from Greece. Surprisingly, while the day did see a decline, the sell-off was not severe and indeed at a number of points the market direction came close to turning positive. The NASDAQ did turn positive briefly. The closing losses for the day were not overly bearish. The consensus among a lot of investors on Monday seemed to be that the decline from Greece was already overdone from the prior week and too many investors seemed prepared to pick up stocks if the decline was large. Therefore while there was a decline at the open, investors jumped in and picked through stocks without waiting for any further decline. This prompted others to buy as well and there was no large sell-off.
Advance Decline Numbers for July 6 2015
It was an average day for volume with 3.5 billion shares traded. Of that volume 74% was to the downside. New 52 week lows came in at 208 versus just 38 new highs. At this point it is hard to say if the 208 new lows which is an increase from Friday, is actually the start of increasing new lows or whether Monday was simply a down day and Tuesday will see fewer new lows.
Market Direction Closings For July 6 2015
The S&P closed at 2,068.76 down 8.02 and well off the lows for the day.. The Dow closed at 17,683.58 down 46.53 and well off the lows. The NASDAQ closed at 4991.94 down 17.27 and turned positive briefly during the morning.
Market Direction Technical Indicators At The Close of July 6 2015
Let’s review the market direction technical indicators at the close of July 6 2015 on the S&P 500 and view the market direction outlook for July 7 2015.
Market Direction Technical Analysis for Jul 6 2015
Stock Chart Comments:
The drop today was not as strong as the drop last Monday. Investors are obviously tiring of the Greek story. When the morning open dropped stocks investors stepped in and bought stocks again. Stocks failed to reach the 200 day moving average although they did come close for a short period of time. Stocks closed well off the lows. The 20 day moving average is turning sideways rather than lower which would indicate that the selling may be coming to an end.
The S&P moved above 2075 during the day and closed just below it. It has not reached the 2050 support level and is giving signals that it may not move that low at present.
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 was 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 but is not building to the downside..
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. The sell signal is active but not strong on Monday.
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 still oversold but trying to climb back. Even today’s selling still saw the Ultimate Oscillator rising.
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 up 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 signaling neutral for stocks for Tuesday.
Market Direction Outlook for July 7 2015
Technically the market did not show signs of stress today but instead closed well off the lows. The technical indicators are gaining more upside traction than downside. Overall for Tuesday there are indications that the lows for this sell-off may already have been made on Monday and stocks are going to attempt a recovery. Tuesday should see a close somewhat higher than today’s close although I would expect some selling at some point on Tuesday. Wednesday after the close we get Alcoa’s results. That should set the market tone for the remainder of the week.
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