Stocks on Monday faced stiff resistance. The morning open saw slight weakness but by the lunch hour the S&P was moving higher and by 11:30 the index was moving to 1958 in an effort to recover the lost morning rally from Friday. Unfortunately profit-taking entered again. The S&P struggled to hold above 195 until around 2:00 PM when heavier selling broke the 1950 level and sent stocks tumbling lower. The fall was on light volume but nonetheless selling picked up into the close as the index fell through 1940 to close at 1932.23, down 15.82 points in what was a rather disappointing day. Monday though was expected to be weak and the market will take more than a couple of days to break through sellers who continue to sit at 1956 which is stiff resistance to the advance.
Index Closing Prices
The indexes closed at their lows. The S&P closed at 1,932.23 down 15.82 and below 1940. The Dow Jones closed at 16,516.50 down 123.47. The NASDAQ closed at 4,557.95 down 32.52.
Advance Decline Numbers
Volume rose to 4.59 billion. By the close 52% of all trades were moving lower but just 46% of all stocks on New York were falling. There were 41 new highs and 26 new lows.
The NASDAQ saw 2.07 billion shares traded which is average. 59% of all volume was being traded to the downside and 52% of all stocks were falling. There were 46 new lows and 34 new highs.
Unlike New York, the NASDAQ continues to show weakness within new highs as new lows have continued to outpace new highs repeatedly during the latest rally.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Monday Feb 29 2016
Stock Chart Comments:
The S&P closed below the 50 day simple moving average (SMA) after two closings above the 50 day. The Upper Bollinger Band has crossed up and over the 100 day moving average which is an up signal for the market but has already turned sideways and could fall back below it tomorrow if the SPX moves lower. This would be a sell signal. The 20 day moving average is continuing to rise. The 200 and 100 day moving averages are still leading the market. The closing candlestick today is bearish for Tuesday.
Support and Resistance Levels:
These are the present support and resistance levels. These levels have not changed since January 2015.
2100 is resistance.
2075 was light support and is also resistance. Below that is 2050 which is also resistance.
Stronger support was at 2000 which is now resistance.
Weak resistance is at 1970 while stronger resistance is at 1956 and technically it is more important than 1970 for the market. 1940 is light support as is 1920. 1900 is more symbolic than anything else.
1870 is support. 1840 continues to be support. The 1820 level is light support. The strongest support level is at 1800.
1775 and 1750 are both 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 all-time high of 2134.72. This would be the biggest correction since the plunge in 2011 of a 20% pullback. A pullback to 1750 from the all-time high would be a drop of 384 points for a decline of 18%. A pull-back of that size would definitely stun investors and bring to question whether the bull market which started in 2009 is finished. From 1750 it is an easy slide to 1600 which was near the market top in 2007.
Momentum: For momentum I use a 10 period when studying market direction. Momentum is positive but pulled back rather dramatically today.
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 Feb 16 which is starting to weaken.
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 and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but after signaling no change in trend is now falling. Another down day tomorrow from the Rate Of Change will change the signal from unchanged to 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 neutral to down for stocks. It is overbought.
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 pointing down for stocks. It is somewhat overbought.
Market Direction Outlook for March 1 2016
The pullback in stocks this afternoon was disappointing but anticipated as 1956 is stiff resistance to the advance. Many investors are using the 1956 level for selling out of positions in anticipation of the rally ending as the general consensus among analysts is that the advance is a bounce but not a recovery and as such, they are advising clients to sell into the rally. This means when a rally gains momentum, sellers show up.
Technically, the indicators are becoming more mixed. The Fast Stochastic is giving a down signal for the second straight day. All the other indicators are positive to neutral but many are falling back after two days of an unsuccessful advance.
March 1 historically has been poor for stocks and the outlook while still positive, is weak for yet another day. Look for stocks to stay weak on Tuesday and continue to be under pressure. A lower day is expected.
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