Friday was an extremely volatile day. Stocks were moving well ahead until the Biotech Stocks started to be sold off in the afternoon. Many analysts believed it was programmed trading while others felt larger investors and institutions were adjusting positions in what has been an overweighted area of the market. Whatever the case, it took the wind out of the rally.
Market Direction Closings For Sep 25 2015
All the markets closed well off their rally highs on Friday. The S&P closed at 1931.34 down 0.90 and below the 1940 support level. The DOW closed at 16,314.67 up 113.35 but mainly due to Nike and the NASDAQ closed at 4686.50 down 47.98.
Advance Decline Numbers for Sep 25 2015
Volume on Friday was 3.7 billion shares and by the close of the day 55% of all New York volume was moving lower which was a reverse of the trend in the morning when almost 80% of all volume was to the upside. New lows though pulled back to 144 and new highs rose to 18. Overall the day belonged to the bears as the rally was lost and aside from Nike Stock the Dow would most likely have closed only slightly positive on the day.
Market Direction Technical Indicators At The Close of Sep 25 2015
Let’s review the market direction technical indicators at the close of Sep 25 2015 on the S&P 500 and view the market direction outlook for Sep 28 2015.
Stock Chart Comments:
SPX Market Direction Technical Analysis for Sep 25 2015
The chart is not encouraging after Friday’s drop from the rally highs. It has left the market with a closing doji-cross candlestick which often signals another turn lower. The Bollinger Bands Squeeze I have been writing about is trending lower. The 100 day moving average is now falling faster away from the 200 day. The 200 day is leading the market. The 50 day is also falling more rapidly. The 20 day which was trying to turn up, is turning back lower.
Overall Friday left the market quite bearish with the S&P unable to hold the 1940 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.
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 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 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: Momentum is negative and falling.
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 Sep 10. On Friday the buy signal was still positive but is on the verge of issuing a sell signal. If stocks move lower on Monday MACD will probably issue a sell signal.
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 moving sideways after bouncing off oversold.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal took a nosedive on Friday with the failure of the rally. It has turned sharply lower and is now negative, predicting the market will be moving lower.
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 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 pointing down for stocks and is oversold..
Market Direction Outlook for Sep 28 2015
The loss of the rally on Friday has investors on edge. The plunge off the rally caught many investors, including myself, and left losses behind. This has investors concerned that even if we see a rally again on Monday, it will at some point fail.
Monday though investors look ready to try again for a rally. However the technical indicators are decidedly bearish and point to more downside ahead shortly. If there is no sell-off further on Monday, it will only be a few days before the market will move lower.
Monday I am expecting a mixed day. I won’t be surprised to see an opening rally and then more weakness. The close on Monday may end up being slightly positive but if it is negative it will be at least down to the 1920 level for the S&P.
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