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Market Direction Outlook For March 8 2016 – Overbought and Lower

Mar 7, 2016 | Stock Market Outlook

The outlook for Monday was for weakness as the market is very overbought but a positive close. We got both but the positive close was slim on the S&P at 1.77.

Index Closing Prices

The indexes closed off their highs for the day. The S&P closed at 2001.76 up 1.77.  The Dow Jones closed at 17,073.95 up 67.18 and above 17,000 for the second day. The NASDAQ closed at 4,708.25 down 8.77.

Advance Decline Numbers

Volume drop by over a billion shares to 4.97 billion. By the close 75% of all volume was moving higher and 63% of all stocks were rising. There were 84 new highs and 11 new lows. This marked another day of new highs outpacing new lows.

Market Direction Technical Indicators At The Close

SPX Market Direction Technical Analysis for Mar 7 2016

SPX Market Direction Technical Analysis for Mar 7 2016

Stock Chart Comments:

The S&P closed just below the 200 day moving average again today.

The Upper Bollinger Band is continuing to climb higher and is above the 200 day moving average indicating there is more upside to the rally, still to come. The 20 day moving average and 50 day moving average are moving higher. The closing candlestick on Monday 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 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 falling.

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 on Monday.

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, rising and extremely overbought.

Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but is now trending sideways. This indicates that further rising prices are stalled at present.

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 down for stocks and is extremely 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 and is also extremely overbought.

Market Direction Outlook for March 8 2016

All signals are pointing to the market as overbought and ready to pullback. Look for stocks on Tuesday to be weak and to end the day negative.  This will not mark the end of the rally, but will slow the advance for Tuesday.


 

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