The market direction outlook for today was for a continuation of the weakness but a chance for a slight advance. Instead the overbought condition is enough to push investors to take profits. The last several days has seen slight movements so it was only a matter of time before the markets would pull back to regroup and consolidate gains.
S&P Daily Market Direction Intraday Chart
Today’s intraday one minute chart shows how choppy the action has been. The SPX has moved consistently lower into around 10:30 and then tried to recover over the lunch hour. This failed to break through 1946 and the market then wandered sideways until breaking the 1942 level which was the morning low. If the S&P recovers the 1942 level then this may turn out to be a one day event and the S&P might try to move higher tomorrow. If though 1942 cannot be recovered then we could finally see some more weakness.
Market Direction Outlook For Move Lower
Whether the move lower is about to start, today if we close below 1942, does mark the second day of reasonable weakness. There are two level where the S&P may try to reach. 1919 is the first level and the second is 1897 which was the previous top in the market direction. Meanwhile all the technical indicators in the chart below are still positive but signaling a change could be about to occur.
Momentum is still positive but pulling back.
MACD is still positive but has registered a drop in the up signal.
Last though is the Ultimate Oscillator which is showing that the S&P is slowly leaving the overbought condition. Once that condition is worked out the market could easily move back up.
Intraday Market Direction Summary
If the market holds around the 1942 level we could see it drift sideways and build support around this level. Right now there is little against the market direction higher except stocks continuing to be in general overvalued. However with the next earnings season set to start July 8 there is now less than a month before investors probably get enthused about possible revenue and earnings numbers again. The market could wander over the next couple of weeks while waiting for those numbers to start.
My own outlook is that the pullback right now looks more like overbought and profit taking rather than the start of something larger but you can never tell for certain. This is why it is good to have support levels to watch. Right now unless the market decides over the next week or so to try to fall back to 1897, this is just an opportunity for more trades. If 1897 is broken, then the market should head to 1870.
Market Direction Portfolio
I entered the market direction portfolio on the downside this morning but I am using tight stops as there are no signals that a major correction will happen, only a pull back to work out an overbought condition. This requires a tight stop to ensure that any gains are not lost. I am not expecting much in the way of gains in the market direction portfolio but this is the best down move in some time and worth trading against.
At this point the market direction today is just weakness and not the start of a correction.
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