I had expected the S&P to break through 2000 on Thursday and try to hold some ground to close positive on the day. I was not expecting much, just a weak advance.
The morning open saw a strong advance on the back of further stimulus talk from the European Central Bank. That died quickly though when the economic outlook for the Euro-zone turned sour going forward with talk of extended weakness and near zero interest rates plus unknown amounts of stimulus which might be required. In other words, plenty of weakness. This brought the market lower and when oil fell back, that got sellers in the mood to dump stocks. Stocks fell from above 2000 down to 1700, a fall of more than 30 points or 1.5% and just after the lunch hour the S&P broke through 1700 for a few brief minutes. That seemed to bring back buyers who picked up stock and ran the index higher into the close.
The S&P closed positive on the day up 0.31 points to 1989.57 which in itself was fairly amazing considering the level of bearishness that developed.
The Dow Jones closed lower but just by 5.23 points and well within striking distance of 17,000 at 16,995.13.
The NASDAQ fell recovered much of the late morning loss to close down 12.22 points at 4,662.16 which was well off the lows.
Advance Decline Numbers
Volume rose on Thursday to 4.38 billion shares. 50% of all trades were to the downside by the close and 49% were to the upside. Declining issues on New York outpaced advances with 55% declining versus 41% advancing. There were 79 new highs and 13 new lows which still continues to suggest that the market will push its way through the selling to retake 2000 and higher shortly.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Mar 10 2016
Stock Chart Comments:
The S&P drop to 1970 broke the 100 day moving average. The morning rally above 2000 broke the 200 day moving average. By the close the day saw the SPX almost unchanged from yesterday but the wide swing up and then back down and then once more higher again, has set up a bearish candlestick for Friday. We have often seen these rallies back from intraday sell-offs and then not seen a follow through on the following day. Right now, the close shows that tomorrow there will be more selling.
The Upper Bollinger Band is no longer climbing although the Lower Bollinger Band is definitely pushing higher. The most telling event was the sharp rise in the 20 day simple moving average (SMA) above the 50 day simple moving average (SMA) which is a short-term buy signal. However the 50 day moving average that was starting to turn up has turned back down and is falling away from the 100 day moving average. This often is a sign that a rally has run its course.
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 resistance.
Stronger support was at 2000 which is still acting as resistance.
Weak support is at 1970 while stronger support 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 and moving lower.
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 was weaker by the close again on 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 positive and falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but unchanged from yesterday. The signal at the close was a positive 7.42. Although higher readings are common, often a reading above 7 is a signal that the market will begin to pullback shortly. Readings above 9 are almost always followed by a pullback.
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 down for stocks for the fourth day and 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 signaling down for stocks and is extremely overbought. However there were moments today when the Fast Stochastic was on the verge of a buy signal.
Market Direction Outlook for March 11 2016
For Friday the technical indicators are issuing cautionary signals. Two indicators, the stochastic indicators are pointing down. The rate of change is warning that prices are not going to move much higher. MACD keeps weakening and the Ultimate Oscillator and now momentum are both falling.
Basically there are 3 indicators positive, 2 that are pointing down and 1 that is advising prices have little room left to climb.
Friday the market needs to break through to the 2000 level on volume and with decent advance decline numbers to the upside. If there is no follow-through from today’s rally up from the sell-off down to 1970, the market will fall back further.
The outlook for Friday is still weak but the bias is almost undecided. The bias at the close looks lower for Friday.
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