The rally on Wednesday was nice to see and the last hour juiced the close considerably. Many analysts are of the opinion a lot of the rally was short covering even though volume was over 4 billion shares. It could have been as at the present level a lot of investors would have been short and looking to lock in profits, especially with the S&P dipping toward 1870 yesterday and even today it dipped in the lunch hour to 1887.14. Whatever the case, let’s review the indicators and see what might occur tomorrow.
The end of September couldn’t come fast enough for a lot of investors. This was the worst September in 4 years. With October coming up there is a split among analysts whether there will be a crash in stocks, which is always a common subject in October for obvious reasons, or the start of a rally back for stocks. Presently the majority are of the opinion October will be poor for stocks. Only a handful are looking for a crash. My outlook is more wait and see than anything else. At present I think there are a lot of stocks that are finally back to realistic prices, especially if the next quarterly revenue numbers are poor again. That said, stocks can always go lower but in general I do not see the economy falling off a cliff. To have a bear market with the economy not coming apart is unusual to say the least. A correction on the other hand is more common and we have not had a lot of corrections since 2011. At the same time I also find it interesting that a lot of investors were complaining that stocks were too high just a few months ago and they wanted in but at lower prices. Now that prices are lower a lot of investors are fearful that the stocks they wanted to buy are going a lot lower. I see nothing wrong with committing a bit of capital to quality stocks that have been beaten down.
Market Direction Closings For Sep 30 2015
Markets closed at their highs today.. The S&P closed at 1920.03 up 35.94 points for a gain of 1.91%. The DOW closed at 16,284.70 up 235.57 for a gain of 1.47%. The NASDAQ closed at 4620.16 up 102.84 points for a 2.28% gain.
Advance Decline Numbers for Sep 30 2015
Volume on Monday came in at 4.5 billion shares traded. Of that volume 86% was to the upside almost the complete opposite of Monday when 90% was to the downside. New lows pulled way back falling to 219. On Monday new lows were a staggering 493. This day belonged to the bulls.
Market Direction Technical Indicators At The Close of Sep 30 2015
Let’s review the market direction technical indicators at the close of Sep 30 2015 on the S&P 500 and view the market direction outlook for Oct 1 2015.
Stock Chart Comments:
SPX Market Direction Technical Analysis for Sep 30 2015
Today after 9 trading days we finally got a long green candlestick into the close. Normally this sets the market up for a slight pullback Thursday morning and then more buying. We will have to wait and see.
The 200 day moving average is leading the market while the 100 day moving average and 50 day are falling quicker now. The 20 day has turned back down.
The S&P closed back above the 1920 level which is light support. The next move could take the S&P to the 1940 and then 1956 level if the rally has some staying power. The first move higher though has to be to the 20 day simple moving average (SMA) which is around the 1940 level.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 was light support. Stocks have been unable to stay above this level and push higher.
2075 was light support. Below that was 2050 which is also was light support. Stronger support was at 2000 which had repeatedly held the market up throughout each pullback in January and February but failed under the waves of selling in the last correction.
Weak support was at 1970 while stronger support was at 1956 and technically it is more important than 1970 for the market. 1940 was light support. 1920 and 1900 have very little if any support. 1900 is more symbolic than anything else.
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. So far 1870 has held the market up better than any of the other support levels aside from 2000 which held the market up for months before the collapse in August.
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 of 384.72 points or 18% from the all-time high of 2134.72. 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 use a 10 period when studying market direction. Momentum is negative but is rising.
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 sell signal on Sep 28. Today the sell signal weakened but remains in effect.
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 but rose rapidly today.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is back rising although it remains negative.
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 pointing up for stocks and issued a buy signal from its oversold state.
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 up for stocks and is oversold. It issued a strong buy signal today.
Market Direction Outlook for Oct 1 2015
Historically October 1 has been poor for stocks. The Dow Index has been down 5 of the last 9 years. That said, the market is already sitting at a low point so whether we see a major sell-off on Thursday, I think is doubtful.
While buying conviction may not have been strong on Wednesday, the strength of the move higher may be enough to get investors off the sidelines, at least for a couple of days. Presently the technical indicators are turning higher. While only the two stochastic indicators have issued by signals, even the negative ones are starting to perk up.
For Thursday I think the market has a good chance to move higher. The morning could see some selling but as long as some unknown catalyst to the downside does not appear, the market should close higher on Thursday.
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