Stocks were already having a tough time when the news from Walmart hit the market. Investors were stunned at the news of the company taking a large earnings hit in the next fiscal year to upgrade technology, their web store and in general improve their stores. The announcement of $20 billion being spent to repurchase shares didn’t seem to draw the attention of investors as much as the general outlook from Walmart where executives predicted a drop in earnings per share that could amount to as much as 12 percent. Investors and particularly analysts pointed to the Walmart announcement as indicative of a slowing economy rather than stiffer competition from the likes of Costco and Amazon.com. This took the Dow lower and pushed the S&P through the 2000 level.
Market Direction Closings For Oct 14 2015
Markets closed off their lows but the Dow led stocks lower . The S&P closed at 1994.24 down 9.45. The DOW closed at 16,924.75 down 157.14 and below the 17000 level again.. The NASDAQ closed at 4,782.85 down 13.76..
Advance Decline Numbers for Oct 14 2015
Volume on Wednesday was moderate at 3.6 billion shares. Despite the decline in the indexes, volume was not as bearish as the market was. 51% of all trades were moving lower and 47% of all volume was higher. New lows were just 29 but new highs fell back to 11.
The drop of new highs just when they were starting to build is concerning. The drop to just 11 today indicates that stocks which were rising were quickly sold off for even modest gains or losses as investors bailed on the market.
Market Direction Technical Indicators At The Close of Oct 14 2015
SPX Market Direction Technical Analysis for Oct 14 2015
Stock Chart Comments:
The drop today while reasonably modest in the S&P has pushed the index back to the 50 day moving average. The index closed just above it. The 20 day simple moving average (SMA) is still turning back up. The 200 day is also still leading the market followed by the 100 day and 50 day. The 50 day is turning higher. The Index closed below 2000 today which as a major support point warns investors that buying dips may not be the best trade to consider until the market proves it can regain the 2000 support 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 on numerous occasions. It remains resistance.
2075 was light support. Below that was 2050 which was also was light support. Stronger support is 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. Stocks continue to have trouble holding the 2000 level.
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. 1920 is now light 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 positive and fell sharply 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 on Friday Oct 2. That signal lost strength today.
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 and falling. It is no longer signaling overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but moving lower swiftly.
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 down for stocks and is still 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, it too is overbought.
Market Direction Outlook for Oct 15 2015
For Thursday the technical indicators while positive are pointing to the market moving lower. After hours on Wednesday Netflix was pummeled over its outlook for the fourth quarter. This could signal a change in investor sentiment and a lower day ahead on Thursday. The market must rebound on Thursday to keep the rally alive. There is a chance of a rally in the early morning trading but it looks doomed to fail by the afternoon. Weakness has crept into the rally and Thursday looks like it will confirm the trend change.
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