The outlook for Wednesday was for stocks to attempt a bounce and then move lower. Instead there was no bounce just a plunge lower. Everything was falling oil prices, a rising US dollar to poor than expected retail sales numbers, poor earnings from Tesla, a decline in revenue at Gamestop due to foreign currency exchange rates to JP Morgan and even Wells Fargo earnings weighed heavily on investors. Doom and gloom were everywhere.
Advance Decline for Jan 14 2015
Volume jumped to 4.4 billion on Wednesday up from 4.1 billion on Tuesday. This marked one of the heaviest days this year for volume. Almost s billion of that volume was to the downside with 221 new lows established. The remaining 31% of volume was to the upside and stocks 111 new highs were still recorded. The day belonged to the bears but there are signs stocks may bounce on Thursday, at least to start the day.
Market Direction Closings For Jan 14 2015
The S&P closed at 2,011.27 down 11.76. The Dow closed at 17,427.09 down 186.59. The NASDAQ closed at 4,639.32 down 22.17.
Market Direction Technical Indicators At The Close of Jan 14 2015
Let’s review the market direction technical indicators at the close of Jan 14 2015 on the S&P 500 and view the market direction outlook for Jan 15 2015.
Market Direction Technical Analysis for Jan 14 2015
Stock Chart Comments:
The most important event today was the S&P falling below the 2000 level to 1990 and then recovering to close at 2011, back above 2000. As well, the S&P at the lowest level was almost ready to hit the Lower Bollinger Band which might have signaled a move down to the 200 day exponential moving average (EMA). Instead the S&P closed back up at the 100 day EMA marking what may turn out to be a key reversal on the day and for the week.
The 20 day SMA is still sitting on the 50 day but has not fallen below it.
All of these point to a probably bounce tomorrow for stocks.
Support Levels:
These are the present support levels.
2075 was light support. Below that was 2050 which was also light support. Stronger support is at 2000 which did today delay a fall and should be able to delay a fall for another day. Weak support is down at 1970. Stronger support is then at 1956 which should delay a further pullback again by at least a day.
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.
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 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 at this time.
Momentum: For Momentum I am using the 10 period. Momentum is 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 a sell signal on Jan 5. MACD continues to be negative but today’s recovery pushed the MACD reading up slightly so today’s closing reading was down only slightly from yesterday.
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 continued sideways despite the plunge lower today.
Rate of Change: Rate Of Change is set for a 21 period. The Rate Of Change is showing that the trend back up may still be possible.
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 signaling market direction is down.
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 signaling down for stocks as well.
Market Direction Outlook and Strategy for Jan 15 2015
While the technical indicators are primarily still negative, there are signals that we should see a bounce back tomorrow unless a different catalyst should enter the markets. At this time the rebound rally from late afternoon on Wednesday looks strong enough to move stocks up, at least in the morning. After the morning I will do another analysis to see where I think stocks could be heading into the remainder of the day.
Right now though there are enough signs to point to a probably bounce. 2000 continues to support the market.
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