The Market Direction outlook for Monday was for stocks to move higher at the open, extending gains from the solid rally on Friday and then for selling to erupt and the market to end lower. Instead investors dumped shares at the open. Technically this unnerved many investors who followed suit and sold out of positions. This pushed the SPX lower than it might have gone. The rest of the day saw the SPX attempt to recover the lost ground from the morning and indeed the recovery was exceptional with the SPX being down just 5.05 points at the close of the day.
SPX Market Direction Intraday Sept 29 2014
The intraday one minute chart below shows the steep morning sell-off. The recovery though was equally impressive with the SPX back up to 1980 by shortly after 11:00 AM. From there though the SPX struggled to hold the 1975 level which regular readers will remember from my market direction outlook articles, is critical for the rally to continue. By the close of the day the market had moved back above 1980 only to fall below it but still close above 1975. All in all it was a surprisingly decent day for the index considering the significant decline at the open.
SPX Intraday for Sept 29 2014
Advance Declines For Sept 29 2014
Volume was slightly better today with 3.1 billion shares traded. 71% of those shares were traded to the downside. There were 171 new lows, an increased number over yesterday and just 20 new highs. The advance decline ratio continues to advise investors to be cautious here and wait for clearer signals before risking much capital.
Market Direction Closings For Sept 29 2014
The S&P closed at 1977.80 down 5.05. The Dow closed at 17,071.22 down 41.93. The NASDAQ closed at 4,505.85 down just 6.34..
Market Direction Technical Indicators At The Close of Sept 29 2014
Let’s review the market direction technical indicators at the close of Sept 29 2014 on the S&P 500 and view the market direction outlook for Sept 30 2014.
Market Direction Technical Analysis for Sept 29 2014
Stock Chart Comments: The most significant event today was the recovery from the early morning sell-off. This was quite dramatic and could set up the Market Direction for further advances. Let’s take a look.
1994 Support: The 1994 level has been retested numerous times over the past two and a half weeks and after having been broken through last week, it is now resistance.
1990 Level: This is light support which broke easily on Thursday..
1975, 1956 Support: Both are light support. 1975 is the more significant valuation at this point and was recovered again today.
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 but the Bollinger Bands Squeeze that is developing could be strong enough to break through the 1870 level as the week unfolds. The strength of the decline today makes it quite possible the 1870 level will be reached which would mark a further 5% correction from today’s close.
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 remained negative on Monday.
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 confirmed sell signal on Sept 10. MACD also continued to stay negative on Monday.
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 was negative again on Monday although it was moving higher into the close.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change was negative and continued to fall on Monday.
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 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 back signaling down for Tuesday.
Market Direction Outlook And Strategy for Sept 30 2014
The final day of September has always been poor for stocks since 1950, so I am expecting additional volatility. Technically the indicators are pointing to continued weakneSS. The general outlook for Tuesday then is for stocks to attempt to rally but weakness should prevail and stocks will eventually end lower, even if it is only slightly.
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