For Wednesday the outlook was lower for stocks. As explained in yesterday’s Market Direction Outlook selling pressure will easily break the 2100 level in the S&P which is what we saw today, but while weak, the close just below 2100 showed that investors are still hoping the rally is not over yet.
Advance Decline for Mar 4 2015
Volume rose to 3.4 billion shares from 3.2 billion on Tuesday. Downside volume was 67% although earlier in the morning it was much higher. The up volume was 30%. New highs though were terrible at 73 and new lows almost doubled to 40. Still though, these numbers continue to look more like profit taking rather than the start of a major down move. We will know more tomorrow.
Market Direction Closings For Mar 4 2015
The S&P closed at 2098.53 down 9.25. The Dow closed at 18,096.90 down 106.47. The NASDAQ closed at 4967.14 down just 12.76.
Market Direction Technical Indicators At The Close of Mar 4 2015
Let’s review the market direction technical indicators at the close of Mar 4 2015 on the S&P 500 and view the market direction outlook for Mar 5 2015.
Market Direction Technical Analysis for Mar 04 2015
Stock Chart Comments:
The S&P right from the start and broke through the 2100 level early in the day. The plunge ended around the 2090 level which then brought in buyers who spent the rest of the day pushing back to close just below the important 2100 level. Tomorrow we need to see a close above 2100 or the SPX will probably head to 2075. Meanwhile the S&P today tried to break through the 20 day simple moving average (SMA) but failed and closed above it.
The Upper Bollinger Band continued to turn down and the Lower Bollinger Band continued moving higher as stocks shortly may be heading into a Bolllinger Bands Squeeze. This could be interesting. If the squeeze is formed by the start of next week, we could see the Squeeze end with the S&P shooting back up. I will be watching this with great interest.
Support and Resistance Levels:
These are the present support levels.
2100 is very light support. 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 recent pullback. 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 turned negative today but only slightly with a reading of 99.95.
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 buy signal Feb 4. MACD is negative today and issued a very weak sell signal of negative 0.26. This sell signal 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 positive, overbought and continued to turn lower today. Note that at this point it is not dropping rapidly despite the two down days.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is choppy and turned lower again today. With a reading of 2.37 the Rate Of Change is indicating that the trend up is in jeopardy. However the last time the Rate Of Change was this low the S&P began the climb to the most recent high so it is worthwhile to remember that the Rate Of Change is not negative. There is no clear signal from the Rate Of Change that the market is heading lower.
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 prices are ahead.
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 as well.
Market Direction Outlook for Mar 5 2015
Technical indicators on Wednesday are continuing to suggest that there is more downside to the present movement than just two days. The signals are mixed again although now we have 4 that are signaling lower and 2 that are still positive. With the “score” being 4 to 2 in favor of more downside for Thursday, the Momentum and Rate of Change are only marginally negative and often stocks will bounce from the Middle Bollinger Band which is where the S&P index bounce back from this morning.
2100 is important for the present rally. If we get another lower close on Thursday then the market is probably going to test 2075 as a first step down and then 2050 which is also the 50 day simple moving average (SMA).
For Thursday the technical indicators are advising that more downside is in store. Personally I am going out on a limb and indicating I think stocks could try a bounce and to close above 2100. It will be interesting to see who is right for Thursday.
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