A number of reasons have been supplied for the drop of stocks on Wednesday despite the morning starting with an extension of Tuesday’s big rally. The most talked about reason was the sharp rise in job openings in July. Analysts believe those numbers are another signal that the Fed will announce they are raising interest rates next week.
Rally Day 2 – The End
The day started off well with a bounce on the back of a huge 7.7 percent jump in Japanese equities. This was the biggest one day bounce since October 2008. As well the Shanghai Composite Index also rose on Wednesday. All looked well until just after the lunch hour when stocks softened as oil prices fell. The last half hour was particularly brutal as volume moved up and sellers once against seemed to panic and jump into dumping shares as fear that Tuesday’s rally was a “bull trap” worried nervous investors.
By the close with stocks well below Tuesday’s market highs, the rally from Tuesday was over.
Market Direction Closings For Sep 9 2015
The S&P closed at 1,942.04 down 27.37. The Dow closed at 16,253.57 down 239.11. The NASDAQ closed at 4,756.53 down 55.40.
Advance Decline Numbers for Sep 9 2015
Volume today came in at 3.6 billion with much of the volume in the last half hour. Down volume made up 82% of all trades which was a sharp reversal from the morning when over 80% of all trades were to the upside. New lows were 54 and new highs 21. The new lows were not overly high but that could change as soon as Thursday.
Market Direction Technical Indicators At The Close of Sep 9 2015
Let’s review the market direction technical indicators at the close of Sep 9 2015 on the S&P 500 and view the market direction outlook for Sep 10 2015.
Market Direction Technical Analysis for Sep 9 2015
Stock Chart Comments:
We have seen a lot of give backs in rallies over the past month. Each one keeps solidifying pressure to the downside. Today’s sell-off pushed the 50 day below both the 100 and 200 day moving averages issuing a major sell signal. The 20 day is now below the 2000 level and continues its plunge lower.
The S&P broke back through the 1970 and 1956 support levels to close at 1942.04 which was just above the 1940 support.
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 was more important than 1970 for the market. 1940 is 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.
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: Momentum is positive but turned sideways with today’s sell-off.
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 Aug 19. Yesterday it was on the verge of a possible buy signal which failed to materialize. MACD is still negative.
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 still trying to rise
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative and has now turned back down signaling that the trend lower remains intact.
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.
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 despite issuing an unconfirmed buy signal on Tuesday.
Market Direction Outlook for Sep 10 2015
We could see a bounce attempt at the open on Thursday but the outlook remains negative. Most investors will take advantage of any morning rebound to get out of further positions so upside is limited. The outlook for the close on Thursday is negative. The outlook for the rest of the week is also negative.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)