The market direction outlook for the last day of April was for stocks to hold on and try to push higher. Recent Fed comments and the latest GDP number seemed to suggest that interest rates would be on hold until perhaps September at the earliest. Today though the Weekly Initial Unemployment Insurance Claims came in at the lowest level since 2000. The drop to 262,000 was far below estimates of 287,000. This started the day off badly for stocks. These Weekly Initial Unemployment Insurance Claims numbers appears to confirm that the economy is actually doing better than the latest GDP indicates and with unemployment continuing to drop, the outlook for an interest rate hike this Spring appears to be a possibility.
Next week investors face the April unemployment number. If it shows continued strength in hiring, this could hurt stocks further as most will question how quickly, not when, the Fed decides to raise rates.
With all the indexes down on the day the worst was the NASDAQ which lost 1.64% for a drop of 82.22 points to close at 4941.42. Let’s look at today’s action and the outlook for Friday.
Advance Decline for Apr 30 2015
On Wednesday volume had reached 4 billion shares. Today volume still pushed higher to 4.47 billion. Yesterday’s jump in volume seemed to be sparked by the prospects of the Fed holding off on an interest rate hike this Spring. Today’s still higher volume was just the opposite as selling intensified during the afternoon which seemed to pull in more investors as the market fell.
74% of the volume was to the downside today with new highs coming in at 39 and new lows at 54.
Market Direction Closings For Apr 30 2015
The S&P closed at 2,085.51 down 21.34. The Dow closed at 17,840.52 down 195.01. The NASDAQ closed at 4941.42 down 82.22.
Market Direction Technical Indicators At The Close of Apr 30 2015
Let’s review the market direction technical indicators at the close of Apr 30 2015 on the S&P 500 and view the market direction outlook for May 1 2015.
Market Direction Technical Analysis for Apr 30 2015
Stock Chart Comments:
The S&P broke through 2100 yet again and this time took out the 50 day simple moving average (SMA) on high volume. This is almost always followed by further downturns. With 2100 broken the market will move quickly down to 2075 which is light support. I would expect that level to break either on Friday or Monday.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was very light support and is once more resistance. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
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 pullback in January and February.
Weak support is at 1970. Stronger support is 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 and bring to question whether the bull market is finished.
Momentum: For Momentum I am using the 10 period. Momentum is now negative.
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 sell signal today, April 30. 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 negative and moving lower.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change is turning lower and if stocks do not turn higher, the Rate Of Change is signaling that the change to down is probably underway.
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 still pointing down for stocks and is no longer 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 also continuing to point down for stocks and is also no longer overbought.
Market Direction Outlook for May 1 2015
I really thought the market had a chance to push back up on Thursday following the Fed comments on Wednesday. However without any follow through on the Fed comments, the market direction was down after all.
Thursday was the end of April and unofficially the end of the best 6 months. Historically May has a mixed performance but it is the start of the worst 6 months of the year. In pre-presidential election years May has been quite poor since 1950. Also historically, the first trading day of May has seen the down up 12 of the last 17 years.
The old adage “Sell In May and Go Away” may indeed hold true this year. The outlook for the first trading day of May is down for stocks.
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