It is simply amazing how often this year the closing doji-cross candlestick has been correct in predicting a down day. There really was no continuation of the rally at the open. Instead stocks held their ground for a short period and then proceeded to move lower. A lot of analysts blamed Carl Icahn’s comments about an overheated bond market for much of the downturn. However most investors are correct when they say “tell us something we don’t know”. Mr Icahn has called the bond market, especially the junk market overheated for more than a year. Eventually he will be right and he can add his name to the list of those who called it first.
Most of today’s downturn can be attributed to investor nervousness over the Greek debt problems that still remain unresolved despite the belief on Monday that they were resolved. Today creditors indicated that sweeping changes still needed to be made before the way would be clear for more funding.
As well rumors came out today that Portugal is also having its own economic issues that may require further austerity measures to reach IMF and/or EU targets for further financing.
Analysts believe that while the economic fallout of a Greek default would be hardly noticeable to the US, they do believe it could lead to a 5 to 10 percent drop in the SPX. That report sent stocks lower.
Advance Decline Numbers for June 24 2015
Volume has finally moved above 3 billion for a few days now and Wednesday was no different with 3.1 billion shares traded on New York. Of that volume 77% was down. New 52 week highs plunged back below 100 today with just 76 new highs and new lows stayed low at just 39.
Volume today did not smack of the start of a major pullback but instead seemed to confirm the belief that this downturn was related to the Greek debt issue and not much else.
Market Direction Closings For June 24 2015
The S&P closed at 2,108.58 down 15.62. The Dow closed at 17,966.07 down 178.00. The NASDAQ closed at 5,122.41 down 37.68.
Market Direction Technical Indicators At The Close of June 24 2015
Let’s review the market direction technical indicators at the close of June 24 2015 on the S&P 500 and view the market direction outlook for June 25 2015.
Market Direction Technical Analysis for Jun 24 2015
Stock Chart Comments:
The rally ran out of steam today. By the close the S&P was back below the important 2110 level at 2108.58. However the low today was still higher than the big rally day of June 18 although much of the rally has been lost. But considering that the rally was first Fed induced and then second pushed by the supposed Greek debt resolution, it is not surprising that so much of the rally was given back. Basically the last few days have seen the market react totally on emotion. Tomorrow we get some actual fundamental outlooks with the release of Nike quarterly numbers.
The market closed today down at the 50 day moving average and the 20 day simple moving average (SMA) is now trending sideways rather than lower. There still is time for the rally to recover and move higher but time is running out quickly.
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 fell dramatically today and is almost neutral. It will turn negative on Thursday if there is some selling in the morning.
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. The buy signal weakened 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 confirmed the doji-cross today and turned negative, falling quickly.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal shows that a change in the trend to up is still possible.
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 and issued a strong sell signal by the close today.
Market Direction Outlook for June 25 2015
Any good news out of the Greece debt issue should push the S&P back up but barring this, the outlook is for more weakness and negative numbers on Thursday, particular with such a strong sell signal from the Fast Stochastic. If there is a bounce on Thursday but no resolution to the Greek Debt restructuring then any bounce should be considered very suspect.
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