The outlook for Tuesday was for stocks to pullback from what is an extremely overbought state. Indeed from the open in the morning, stocks were under pressure. Over the lunch hour stocks tried to recover but fell into the afternoon. The last hour saw steadier selling and the S&P closed just off the day’s low at 1979.26 down 22.50 points for a loss of 1.12%. This took out the 1980 light support level and left the index back below the 2000 level.
The Dow Jones closed had a triple digit loss closing down 109.85 points for a loss of 0.64%, about half the loss of the S&P. The morning around 11:00 AM saw the low of the day when the Dow Jones was down at 16,921.51.It closed at 16,964.10 back below 17,000.
The NASDAQ has had the toughest recovery in this rally from the Feb sell-off. The number of new lows have plagued the NASDAQ throughout this rally. The NASDAQ closed almost at its lows down 59.43 points to close at 4,648.82 for a loss of 1.26% which again as the largest loss of the three indexes.
Advance Decline Numbers
Volume drop a bit on Tuesday but still was around average at 4.64 billion. Much of the volume though came in the last hour of the day. By the close 84% of all volume was moving lowing and 74% of all stocks were falling on New York. There were 79 new highs and 6 new lows so despite the decline in the S&P, there remains strength within the market itself.
Market Direction Technical Indicators At The Close
SPX Market Direction Technical Analysis for Mar 8 2016
Stock Chart Comments:
The S&P sold lower to close at the 100 day moving average. This is the first rejection of the rally from the 200 day moving average.
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 20 day is on the verge of moving above the 50 day moving average which is an up signal. The closing candlestick on Tuesday is bearish for Wednesday.
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 rising despite the selling 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 was weaker by the close on Tuesday..
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 falling.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but is now trending higher. This indicates that some prices are starting to rise among stocks again despite the selling. This is noticeable in the number of new highs today which are higher than yesterday and the decline in the number of new lows.
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 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 signaling down for stocks and is also extremely overbought.
Market Direction Outlook for March 9 2016
Signals continue to point to the market as being overbought but the extreme overbought condition is quickly evaporating. There is an underlying strength within the market still. The selling today could continue into Wednesday but we could see the market try to regain the 1990 level quickly on Wednesday.
The outlook is overbought and weak but more sideways than deeply lower. Don’t be surprised if the market sells off in the morning and then stages an attempt to recover the losses in the afternoon.
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