In yesterday’s market direction outlook I commented that it is important to remember this is a strong bull market and that investors might try to recover 1990 and 1994 on either Wednesday or Thursday.
What we saw today was the market bouncing back with the “buy the dip” traders picking up stocks at what they felt were better prices with stocks sitting at the middle Bollinger Band. Let’s take a look at today’s action.
SPX Market Direction Intraday 1 Minute Chart
The opening on Wednesday saw stocks bounce quickly to 1990 and then sell lower. The selling though was reasonably muted and by 11:00 AM with selling not falling further, investors stepped in an started buying. Many looked at yesterday’s move lower as the best entry opportunity in almost two weeks. The 1990 level was quickly retaken and then the market spent much of the afternoon struggling with the 1994 level. By the close stocks were near the highs for the day around 1995.69.
SPX Intraday Sept 10 2014
Advance Declines For Sept 10 2014
You could tell today that a number of investors felt that this was a buying opportunity as volume finally picked up. 2.9 billion shares were traded with 55% of the volume being up. New highs though came in lower than any previous day in a couple of weeks with just 49 new highs. New lows moved up again with 46 new lows.
Market Direction Closings For Sept 10 2014
The S&P closed at 1995.69 up 7.25 or reclaiming about 50% of yesterday’s loss.. The Dow closed at 17,068.71 also reclaiming just slightly more than 50% of yesterday’s loss. The NASDAQ closed at 4586.52 up 34.24 for the best move among the indexes..
The Russell 2000 IWM ETF recovered about 50% of yesterday’s loss moving up 68 cents to $115.86..
Market Direction Technical Indicators At The Close of Sept 10 2014
Let’s review the market direction technical indicators at the close of Sept 10 2014 on the S&P 500 and view the market direction outlook for Sept 11 2014.
Market Direction Technical Analysis for Sept 10 2014
Stock Chart Comments: Today’s prime event was the S&P bouncing off the Middle Bollinger Band. Yesterday the SPX fell to the Middle Bollinger Band which is basically a 20 day simple moving average (SMA). That was part of the cause of the bounce today. The bounce today recovered about 50% of yesterday’s loss which could signal that this was just a one day bounce. Today investors recovered 1990 and 1994 valuations.
1994 Level: If 1994 breaks decisively the SPX immediately fell to 1990 and then broke. With 1990 broken the next level to fall to is 1975. If today is just a bounce, 1990 will be revisited shortly.
1975, 1956 Support: Both are light support and both may be tested in coming days. 1975 is the more significant valuation at this point.
1930 Support: Light support is found at 1930.
Strong Support Levels are at 1870 and 1840 (no longer shown). At present I am not expecting any break of either of these levels.
The other two support levels not shown in the chart above 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 now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating as there are no signs of any impending correction of that magnitude.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is now negative.
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 buy signal on Friday August 15. MACD issued an unconfirmed sell signal today.
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 positive today.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change stayed positive and moved sideways meaning we could see more positive moves tomorrow for stocks.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is lower. It is no longer overbought.
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 still signaling down and it is no longer overbought. The signal though is close to issuing a buy signal which we could see tomorrow.
Market Direction Outlook And Strategy for Sept 11 2014
Today’s bounce back was not unexpected. We could see the bounce continue for another day or in fact Tuesday’s selling might have been a one day event. However technically the market still looks weak. With MACD now issuing a sell signal which is unconfirmed at the present time, we could see stocks start higher in the morning and then pullback or move sideways. The move lower for the market on Tuesday was not a huge move down and the SPX is well within striking distance of the all-time high.
The advance decline ratio though is poor and September tends to be a poor month for stocks and has been that way since 1950. But as investors, we cannot forget that this is a strong bull market that at present is experiencing a bit of weakness. Further weakness can be expected but any huge sell-off is not in the technical indicators at present.
For Thursday stocks look set to rally in the morning but then could turn negative or certainly sideways. If that happens it will confirm that Wednesday was just a bounce and nothing more.
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