The day saw the market jump at the outset and shortly before 11:00 AM it had almost reached 2040. That brought in sellers who dumped shares once again which depressed the markets. The S&P set up a waterfall decline which did not end until around 2:00 PM. The decline pushed the S&P back below 2030. A late day rally brought the market back above 2030 but the close was not pretty with stocks down 2.89 points to 2030.77 but looking weak for the second day. Weak earnings are disappointing investors and keeping stocks under pressure. IBM was the big story to start the day off. By the close big blue was down 5.75% to 140.64 marking yet another consecutive quarter of losses. The NASDAQ was under pressure from declining Biotech stocks yet again. Harley Davidson (HOG) dropped 13.92% after its earnings disappointed investors. Overall there has been no real catalyst to help push stocks higher and sellers remain seated at various support levels ready to sell as we saw this morning.
Market Direction Closings For Oct 20 2015
Markets closed well off their highs today. The S&P closed at 2030.77 down 2.89 but clinging to the 2030 level. The DOW closed at 17,217.11 down 13.43 which was remarkable considering the selling pressure in IBM. The NASDAQ closed at 4,880.97 down 24.50 marking a fairly good performance considering the selling pressure of biotech stocks once again.
Advance Decline Numbers for Oct 20 2015
Volume on Tuesday was 3.3 billion shares with up volume comprising 56% of all trades and down volume 42%. Advancing issues on New York outpaced decliners with 59% of all stocks climbing and 38% falling. New highs rose to 60 another increase from the recent rally and new lows rose slightly to 21.
Overall these numbers show a bias to the upside remains but selling pressure is continuing to creep higher in the overall volume numbers.
Market Direction Technical Indicators At The Close of Oct 20 2015
Stock Chart Comments:
Once again the S&P was rebuffed at the 200 day moving average. The close today left the S&P with another doji-cross candlestick which often signals a pullback for the next day. The 200 day continues to lead the market followed by the 100 day and 50 day. All three major moving averages are giving no signs that they are going to turn back up. The 20 day moving average however is continuing to rise and almost ready to move above the 50 day which would signal the uptrend will continue.
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 but is continuing to fall. The readings however are still strong despite the decline in momentum.
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 has begun to fall back and today it fell still further. It is however still strongly positive at 7.91 and the MACD histogram is still showing strength.
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 has risen back to being overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal is positive but after rising yesterday it is back pointing sideways for stocks. This is probably fairly accurate as the market is indeed moving sideways. The Rate Of Change may be indicating that even if the market moves higher it will be uneven and primarily sideways.
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 is still overbought. The up signal though is very weak and almost neutral in the direction.
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 neutral for stocks, it is very overbought.
Market Direction Outlook for Oct 21 2015
Wednesdays often tend to be positive days for stocks. The bias in the technical indicators still points lower and the closing candlestick again today is concerning so we may indeed see a move lower on Wednesday but technically the bias is still higher for stocks or at least not much lower. Without a catalyst to the upside though stocks are losing momentum which means a dip somewhat bigger than we have seen over the past couple of days may start soon unless stocks can get going. The outlook is almost neutral then, but I think stocks want to move higher. We will have to label this outlook MIXED with a bias higher. Stay cautious on Wednesday and watch for any signal that stocks are going to turn lower.
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