Since December 2014 it has been rare for the markets to have follow through days following one day rallies of large gains. Instead we have seen large rallies limited to single days. Most of the large one day rallies have resulted in stocks pulling back in subsequent days. This is what happened again today.
Advance Decline Numbers for May 11 2015
Volume once more declined on Monday, down 400 million shares for the day. Just 2.9 billion shares were traded with 68% of all volume moving lower and only 36% moving higher. New highs fell lower on Monday to just 57 while new lows stayed the same as on Friday at 26. Overall the day was poor for the bulls but losses were mild.
Market Direction Closings For May 11 2015
The S&P closed at 2,105.33 down 10.77. The Dow closed at 18,105.17 down 85.94. The NASDAQ closed at 4993.57 down 9.98.
Market Direction Technical Indicators At The Close of May 11 2015
Let’s review the market direction technical indicators at the close of May 11 2015 on the S&P 500 and view the market direction outlook for May 12 2015.
SPX Market Direction Technical Analysis for May 11 2015
Stock Chart Comments:
The S&P fell below 2110 today which I was surprised at. There was enough momentum in the morning for stocks to be able to hold the S&P up above 2110 but as concern over interest rates rising in June reached the markets, selling erupted pushing the S&P below 2100 on the day. The losses today were small but they still require watching for signals that a deeper pullback is coming.
Support and Resistance Levels:
These are the present support and resistance levels.
2100 is very light support. Stocks will have to stay above it to change it back to solid support and convince investors that the market has staying power and will push well beyond 2100. That still does not appear to be the case.
2075 is light support. Below that is 2050 which is also light support. Stronger support is at 2000 which has repeatedly held the market up throughout each pullback in January and February.
Weak support is at 1970. Stronger support is at 1956.
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 and bring to question whether the bull market is finished.
Momentum: For Momentum I am using the 10 period. Momentum is negative to neutral 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 May 5. In general stocks are moving higher rather than lower.
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 once again negative but is trending more sideways than up or down.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change has signaled a change to the downside but the rebound on Monday has placed that trend lower.
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 up for stocks for Tuesday.
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 up for stocks for Tuesday.
Market Direction Outlook for May 12 2015
Today’s slight weakness is not unusual and was certainly anticipated. Big rally days are just not gaining any “true believers”. They are drawing in traders but few investors. For Tuesday there are still 2 technical indicators with up signals in place but 4 with neutral to down signals. For Tuesday then I would expect some weakness at the open and then a pick up in the market by midday.
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