The market direction outlook for today was once again a bit of weakness which should result in a lot of sideways action but then a move higher to close off the day. The sideways action this morning is to be expected. Both the US and Canadian stock markets have a shorter week. Tuesday is Canada Day so the Toronto Stock Exchange is closed and Friday is Independence Day which closes the US markets. Historically July is the best of the weak 6 months of the year for stocks and coming out of June with what certainly looks like a gain, is setting up July for what is most likely further gains for the year.
Advance and Decline
While the market might look choppy this morning, the key is to watch the underlying advance and decline statistics. For example, this morning the advancing issues were just 51% of volume but the number of new highs was already 160 by 11:30. New lows were just 2. Obviously the momentum to stocks is still higher.
S&P Market Direction – Morning
The one minute intraday chart below from this morning shows the sideways action that has developed to 11:30. The most important thing to take away from this chart is that there is no real selling going on. Investors continue to be reluctant to get out of positions but instead are picking up stocks on dips to unload them at slightly higher prices. This is keeping the market a bit choppy but well supported.
Market Direction and 1956 Level
The other thing to take away from the above chart is that each little selling continues to stay above 1956. The market is starting to build a support level at 1956. While not strong by any stretch, over time it may become a stronger support point and in July if the market moves higher, 1956 may turn out to be pivotal. For now, watching the 1956 level is important for short-term trades. If the market stays above 1956 at present, then continuing to trade is advantageous. If though it should fall back through 1956, then I will be looking for more Put Selling opportunities further out of the money on my favorite stocks.
SPX Market Direction Outlook Into The Afternoon
Into the afternoon stocks look set to continue to move sideways but I am still expecting a higher close even if only slightly. Right now it is “steady as she goes” for stocks. It will take a larger catalyst to get stocks correcting at this point. The best bears can hope for presently is a slight pullback due to a growing overbought condition again, but a correction will need a catalyst and at present Iraq and the Ukraine are the only major catalysts available and investors seem to be content that neither of these can impact stocks and the economy in general.
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