The market direction outlook for Friday was for stocks to continue the bounce. Instead the rise of the dollar and the decline of the Euro combined with a further drop in oil prices to spook investors who gave back the entire rally from Thursday by mid-morning on Friday. Part of the decline was also caused by a statement from IEA which read “behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.” That statement was followed shortly after by a number of downgrades by analysts for the price of oil. A number of analysts speculated that oil will probably fall to the high 30’s a barrel shortly.
Investing is an emotional affair for the majority of investors. Comments such as above can spook even the most hardened of investors causing them to consider “downsizing” their positions. In other words, selling a portion of their holdings for that “just in case scenario”. Caution remains warranted for investors.
Advance Decline for Mar 13 2015
Volume on Friday rose by 100 million shares from Thursday o 3.4 billion. 70% of all volume was to the downside which was a direct opposite of Thursday’s action where 71% of all trades were to the upside.
There were 73 new highs and 119 new lows. The numbers would have been worse except for the last hour of trading which skewed the upside numbers. There was no panic in Friday’s selling, especially in the morning, but there was high down volume to start the day off.
Market Direction Closings For Mar 13 2015
The S&P closed at 2053.40 down 12.55 but still above the important 2050 valuation . The Dow closed at 17,749.31 down 145.91. The NASDAQ closed at 4871.76 down 21.53.
Market Direction Technical Indicators At The Close of Mar 13 2015
Let’s review the market direction technical indicators at the close of Mar 13 2015 on the S&P 500 and view the market direction outlook for Mar 16 2015.
SPX Market Direction Technical Analysis for Mar 13 2015
Stock Chart Comments:
The loss of Thursday’s rally is disappointing but you can see in the chart that the SPX still closed off the lows for the day. It also lost the 50 day simple moving average (SMA) and closed below it but still closed above the 100 day exponential moving average (EMA). Dropping back below the 50 day within a day or two is not uncommon for markets trying to reassert itself. As well the market still managed to put in a higher low for the day and it closed inside the Lower Bollinger Band, both of which are good signs for the market. However the ease with which the market gave up all of Thursday’s gain in a morning is troubling and shows there is still a lack of conviction among investors. Most are hoping for higher prices but at the first whiff of trouble, they seek the exit doors. This is a tough market to believe it can convincingly move higher and stay higher.
The market closed back below the 2050 level but stayed within a very close proximity of it which means the 2050 is still not lost as a support level.
On Thursday I commented on how the market on Thursday looked better than it has in many days. On Friday the market looked terrible until the last hour of trade. Caution is warranted when trading in this market.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is now resistance. 2075 was light support and is now resistance. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each recent pullback. That may not happen this time. Weak support is at 1970. Stronger support is then 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 at this point and it is not something I am anticipating at present.
Momentum: For Momentum I am using the 10 period. Momentum is negative and trending sideways rather than up or down.
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 weak sell signal on March 4. That sell signal on Friday was almost unchanged from Thursday.
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 but continues to rise.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is choppy and turned lower again today. The rate of change on Friday slipped slightly lower which could be signaling that the bias for the market is to the downside.
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 for Monday and issued an unconfirmed buy signal by the close on Friday. The Slow Stochastic is still oversold.
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 for Monday and is oversold. The recent up signal from Thursday’s trading went unconfirmed on Friday.
Market Direction Outlook for Mar 16 2015
Technically the indicators have a mixed outlook which is not unusual considering the constant whipsaws. Investors continue to tire of the uncertainty in market direction as they attempt to put in place positions that might last more than a day. Of the technical indicators only one is pointing higher, the Slow Stochastic and it looks out beyond more than a day, so this could be telling investors that within a day or two the market could rally again. However aside from the Slow Stochastic the general direction pointing to by most of the technical tools, is lower.
A lot depends on the US dollar, the Euro and the price of oil but for Monday the biggest catalyst may be the Fed again who meet on Tuesday for a two-day meeting. Monday then looks like it could remain fairly steady with a bias down but weakness throughout the market ahead of the Fed on Tuesday.
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