Friday’s outlook was for more weakness in stocks, poor volumes and a lower closer. By the end of the day stocks were in the red but volume finally moved higher. The GDP contracted 0.7 percent annualized disappointing the outlook for a gain of 0.2 percent. Investors are starting to pay attention to the transportation index as it continued to slide on Friday. It is now within easy reach of entering a full correction as the index is almost 10 percent below its 2014 high.
Advance Decline Numbers for May 29 2015
One of the best days for New York trading was on Friday with 4 billion shares traded. Of that volume 70% was to the downside and 29% to the upside. Only 49 new highs were recorded but 60 new lows.
The decline off the most recent all-time highs has grabbed the attention of investors and on Friday the pullback drew in my investors. This may bleed over into the start of June.
Market Direction Closings For May 29 2015
The S&P closed at 2,107.39 down 13.40. The Dow closed at 18,010.68 down 115.44. The NASDAQ closed at 5,070.03 down 27.95.
Market Direction Technical Indicators At The Close of May 29 2015
Let’s review the market direction technical indicators at the close of May 29 2015 on the S&P 500 and view the market direction outlook for June 1 2015.
Market Direction Technical Analysis for May 29 2015
Stock Chart Comments:
The drop on the S&P on Friday placed it within easy reach of falling below 2100 which would place it below the 50 day moving average.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 is very 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 negative and falling.
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 stronger sell signal on Friday but it has to be confirmed.
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 moved up just slightly today. It is still signaling that the latest trend up is changing to down.
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 still signaling down 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 down for stocks.
Market Direction Outlook for June 1 2015
The final trading day of May saw stocks close near the lows but off of them. That should set Monday morning up for a bounce back attempt from the open. However the technical indicators are moving overwhelmingly negative. With the S&P ready to quickly fall below 2100 and the Dow set to close below 18,000 (again), stocks should lose what I am expecting to be a short-lived early morning rally on Monday and then close lower to start June.
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