The market direction outlook for Tuesday was for stocks to try to bounce and then move lower. All of that occurred in just the one day. While the bounce was strong, I think there is a better bounce to still to come before the SPX moves down to test support at 1870.
SPX Market Direction Intraday 1 Minute Chart
The opening saw a sharp rally attempt which failed. The SPX then quickly dropped below 1880. Much of the morning the market traded around the 1880 valuation and then climbed into the lunch hour. The climb though failed to reach 1900 and the SPX then slipped back for the remainder of the day. Around 3:30 the market dove lower reaching 1871.79 just a squeak away from support at 1870. This brought in some quick buying which pushed the SPX higher, but still let it close below 1880 at 1877.70.
SPX intraday for Oct 14 2014
Advance Declines For Oct 14 2014
Just like Monday, the late day plunge dragged in more volume and on Tuesday volume was one of the heaviest day’s since July with 4.8 billion shares traded. Once again the plunge late in the day brought in sellers but also a lot of buyers who seem to be counting on stocks not falling below 1880 or certainly 1870. New lows though pulled back but still, the late day selling brought in 358 new lows for the day. New highs came in at 32.
The higher volume is advising that a lot of investors are thinking the bottom to the selling has to be close.
Market Direction Closings For Oct 14 2014
The S&P closed at 1877.70 up 2.96. The Dow closed at 16,315.19 down 5.88. The NASDAQ closed at 4227.17 up 13.52
Market Direction Technical Indicators At The Close of Oct 14 2014
Let’s review the market direction technical indicators at the close of Oct 14 2014 on the S&P 500 and view the market direction outlook for Oct 15 2014.
Market Direction Technical Analysis for Oct 14 2014
Stock Chart Comments: The most important event today was two-fold. The first was the rally back which at one point saw the Dow up over 100 points and the SPX up over half a percent. The second was the give back of that rally which saw heavy selling half an hour before the close, a signal that the next bounce could be suspect and probably will be. The SPX is now down 7.3% from its all-time high.
Strong Support Levels are at 1870 and 1840 (no longer shown). Both levels are now in jeopardy of being broken through but the overbought nature of the market may stall the descent or certainly slow it down.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating at this time. That however could change if the selling intensifies..
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is negative and extremely oversold.
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 Sept 10. MACD is negative and extremely oversold.
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 extremely oversold but was starting to turn up near the close..
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change fell lower and is extremely oversold.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is lower. It is extremely oversold.
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 still signaling down and it is extremely oversold.
Market Direction Outlook And Strategy for Oct 15 2014
All the technical indicators are extremely oversold. The bounce today did nothing to alleviate the oversold condition stocks find themselves in. Investors remain nervous and the loss of the rally during the day was somewhat disheartening to see. Still though, it shows there is interest in stocks among investors even if they are mainly traders.
For Wednesday I think the rally we saw today will be tried again and stocks should close up, even if only marginally. Any rally at this point though is highly suspect and should be used to trade out of positions. Meanwhile today volume certainly indicates that a lot of investors believe the bottom to the selling is close at hand. I am not sure I would agree. I think a bounce is likely but then a move down to 1870 is probably the next move.
For Wednesday then I am expecting another rally attempt, but ultimately it will fail and stocks will move lower.
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