The outlook for Friday was for some weakness following Thursday’s big gain, however I looked upon the weakness as an opportunity to set up some further trades which I took advantage of. I had expected the afternoon would have been stronger than we saw and stocks would close either slightly higher or just slightly lower. I was looking for a slightly higher close. This did not happen as concern over the Greek debt situation impacted stocks and in particular the US dollar. The dollar moved higher as investors moved again to the safety of the dollar. A recent article pointed to outflows of more than $1 billion euros a day from Greece. Add in that Friday was options expiration for the month of June and sll of this impacted stocks.
Advance Decline Numbers for June 19 2015
Volume on Friday was better rising to 4.4 billion for one of the busier days this year but not the busiest. New highs were 100 and new lows 56 but down volume swamped by about 2 to 1. Considering that Thursday saw the NASDAQ and the Russell 2000 set new highs and the S&P sat near its all-time high, it was not surprising that volume was heavier with investors taking profits and options expiring.
Market Direction Closings For June 19 2015
The S&P closed at 2,109.99 down 11.25. The Dow closed at 18,015.95 down 99.89. The NASDAQ closed at 5,115.00 down 15.95.
Market Direction Technical Indicators At The Close of June 19 2015
Let’s review the market direction technical indicators at the close of June 19 2015 on the S&P 500 and view the market direction outlook for June 22 2015.
Market Direction Technical Analysis for June 19 2015
Stock Chart Comments:
Friday’s pullback wiped out about half of the rally from Thursday. This is larger than a usual dip and brings into question the rally from Thursday. The close though was still high enough to confirm the rally from Thursday including staying above the 50 day simple moving average (SMA) Monday will be important to the rally from Thursday..
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 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 positive but back to 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 buy signal on June 18. That signal was confirmed on Friday.
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 remained positive on Friday continuing to confirm the rally from Thursday.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is still pointing to a possible change in trend but the trend direction remains unknown.
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 pointing up for stocks despite the pullback on Friday.
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 still pointing up but took a sharp turn on Friday which is somewhat concerning for the rally on Thursday.
Market Direction Outlook for June 22 2015
There were good reasons for the drop on Friday but with the Greek question still in “limbo” investors may be reluctant to risk capital on Monday. The morning certainly looks like it will move lower to start the day even if the opening has a sharp bounce up.
Technically 5 of the 6 indicators are positive which should support stocks moving higher to start the week but there are signals that many of the indicators were weakening on Friday due to the stronger than expected pullback.
The outlook for Monday then is for stocks to be weak with a bias lower but Greece, the Euro and the US dollar are the unknown factors this week, certainly at the start. Presently it looks like weakness in the morning and then possibly an attempt to move positive in the afternoon but a lot depends on Greece. If there are further worries on Monday and the likelihood of no resolution, stocks will probably continue to move lower. A break and close below 2100 would be bad for the S&P this time around and will lead to a stronger move lower.
This latest rally has been Fed induced for the most part and this year these Fed induced rallies have not lasted long. The outlook for Monday then is for stocks to be weak with a bias lower but Greece, the Euro and the US dollar are the unknown factors this week, certainly at the start. Any kind of positive resolution on Greece and stocks should rally and the dollar fall back.
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