The collapse of stocks on Monday was in large part caused by the continued decline of the Biotech sector. Companies like Gilead Sciences are down nearing 52 week lows and some are into multi-year lows. Gilead Sciences fell 5.3% today to close at $94.80, down 23% or $28.57 from its all-time high set in June of this year.
Commodity stocks continued to collapse with London Stock Exchange mining company Glencore PCL taking center stage with a 29 percent plunge on Monday. It’s 52 week high was $343.95. On Monday it closed at $68.62 on the London Stock Exchange. Here at home there are many commodity stocks in similar trouble. Cliffs Natural Resources Stock is one company I get emails about almost daily. Today CLF Stock fell 7.98%. The stock has a 52 week low of $2.28 and a 52 week high of $11.70. This is a plunge of 80.5% of value. With commodity stock so badly beaten up investors who are still holding some commodity stocks have to wonder if there is any reason to sell now since these stocks are have lost horrendous amounts of value. Instead many investors must be wondering if commodity stocks are now cheap enough to be bought. Personally I would want to see better bottoming processes in commodity stocks before entering but many are definitely tempting.
Overall the correction has placed many stocks into bear markets. The question then is whether these stocks are bargains at present prices or have they further to fall.
Market Direction Closings For Sep 28 2015
Markets closed near the daily lows. The S&P closed at 1881.77 down 49.57 and within a few points of the important 1870 support level. The DOW closed at 16,001.89 down 312.78 and below 16000 intraday in the afternoon before recovering slightly. The NASDAQ closed at 4543.97 down 142.53.
Advance Decline Numbers for Sep 28 2015
Volume on Monday came in at 4.3 billion shares traded. Of that volume 90% was to the downside. The most staggering statistic from today’s action is the number of new lows which came in at 493 with just 4 new highs. These numbers are incredibly bearish for stocks in general and signal there is more downside still ahead.
Market Direction Technical Indicators At The Close of Sep 28 2015
Let’s review the market direction technical indicators at the close of Sep 28 2015 on the S&P 500 and view the market direction outlook for Sep 29 2015.
Stock Chart Comments:
SPX Market Direction Technical Analysis for Sep 28 2015
The chart continues to look discouraging for the bulls. The Bollinger Bands Squeeze is starting to turn lower and stocks are following the Lower Bollinger Band down.
The 200 day moving average is leading the market while the 100 day moving average and 50 day are falling quicker now. The 20 day has turned back down.
The S&P closed below the 1920 light support level but above the 1870 support level. It is now about 12 points away from 1870. The August low was 1867. I am expecting some kind of bounce off the 1870 level but if that breaks stocks will move lower quickly.
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 was 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: For momentum I use a 10 period when studying market direction. Momentum is negative and building to the downside..
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 today, Sep 28. The sell signal must be confirmed before it can be acted upon..
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 falling lower.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal continues its sharp move lower. It is now deeply negative at minus 5.33 and shows no sign of changing yet..
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 29 2015
There has been so much damage done to stocks that any rally up is bounce to fail. For Tuesday I am expecting a lower close and a test of the 1870 level. We should however see a bounce off the oversold condition the market is in. That bounce will probably be in early trading on Tuesday before the downturn continues. It will not be enough to turn the market direction around. Instead stocks should close lower on Tuesday even with a bounce in the morning.
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