The outlook for Wednesday Sep 2 was for stocks to attempt a rebound rally, especially with the Chinese stock market closed for holidays for the remainder of this week. That brought volatility lower and helped to set the market up for a bit calmer day. Investors in the morning were cautious but by the afternoon with volatility lower, investors stepped back into stocks and the market had a very decent day.
Advance Decline Numbers for Sep 2 2015
Volume today came in at 3.7 billion and unlike yesterday, 81% of the volume was to the upside. New lows were at 78 and new highs just 4 but it will take time to see new highs start to recover. What we want to watch is for any sign that new lows are rising again. On Wednesday new lows were fine and point to a rebound rally.
Market Direction Technical Indicators At The Close of Sep 2 2015
Let’s review the market direction technical indicators at the close of Sep 2 2015 on the S&P 500 and view the market direction outlook for Sep 3 2015.
Market Direction Technical Analysis for Sep 2 2015
Stock Chart Comments:
The S&P on Wednesday recovered more than half what was lost on Tuesday. None of the moving averages have changed though as the 50 day and 100 day continue to move lower falling to the 200 day moving average.
The index looks decent enough at the close that more buying might enter the index on Thursday ahead of Friday’s unemployment numbers. But remember, much of the buying today was a result of China’s market being closed. With that volatility out of investors minds, stocks were bound to rally.
The S&P closed near the 1956 support level. Thursday needs to see the index close above it to keep the rally alive.
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. 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 strongly negative. Readings are the worst this year and the worst since the fall of 2011.
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. That sell signal remains strong today and is why protection should continue to be considered.
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 back negative.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change signal remains negative but trying to climb back. The rate of change is strongly negative and trying to bounce back.
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.
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 but an up day could see a buy signal generated.
Market Direction Outlook for Sep 3 2015
The technical indicators remain weak for Thursday’s outlook and continue to point to more downside although a number of them are trying to bounce back. With China’s market closed for commemorative holidays investors are not focused on additional bad news for Chinese stocks. That brought in buying today which looks like it may try for a second positive close on Thursday. Protection still remains warranted. Rememberso far, this is a technical bounce which at present should see more selling shortly.
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