The market direction outlook for Monday was for stocks to continue to advance. Both the Slow Stochastic and the Fast Stochastic were the biggest technical supporters of another move higher for the indexes. Today’s recovery in the SPX was particularly encouraging with the index closing at the highs for the day. Netflix after hours reported lower revenue but decent earnings and announced they would be raising their subscriber fees slightly in coming months. Note though that revenue was less than expected. Netflix stock moved higher on the news after hours but I would expect within a couple of days if not earlier, more investors will focus on the revenue rather than the earnings. Still these were good numbers but still no the numbers the market needs to bring in more investors.
Market Direction S&P Intraday Chart April 21 2014
The one minute chart below for April 21 2014 shows how choppy today’s action was. The morning saw a sharp rally which faded within half an hour and the market pulled back. The market though it broke through 1865 recovered quickly and then traded around the 1865 level for some time. That kept investors interested and they stepped back in shortly after 11:00 and moved the market higher for most of the afternoon. The rally faded in the final hour but then picked up steam into the close and the S&P market direction closed at the highs for the day. I had not expected the S&P to close above 1870 for the day. While nice to see, this will create an overbought condition which could mean some weakness on Tuesday. We will have to look at the market direction technical indicators to see what is the outlook.
Advance Declines For April 21 2014
Stocks continued to advance on Monday with advancing issues still beating out decliners with 59% of stocks advancing and 37% declining. However the number of new highs was not as encouraging with 118 new highs and 66 new lows. While the numbers continue to favor the bulls, investors need to see much higher new highs to confirm that the sell-off is over and the indexes, including the NASDAQ can recover all the lost ground..
Market Direction Closings For April 21 2014
The S&P closed at 1871.89 up 7.04. The Dow closed at 16,449.25 up 40.71. The NASDAQ closed at 4121.55 up 26.03.
The Russell 2000 ETF IWM rose $53 cents to close at $113.45
Market Direction Technical Indicators At The Close of April 21 2014
Let’s review the market direction technical indicators at the close of April 21 2014 on the S&P 500 and view the market direction outlook for April 22 2014.
Despite the choppiness today, the market direction technical indicators are turning higher. Let’s take a look.
The 1750 level continues to hold the S&P up since the correction ended in early February. All the levels of any support above 1800 have been broken and will need time to heal and create support again. Any downturn in stocks will quickly see these levels above 1800 break. The only level above 1800 that has any support worth mentioning is the 1840 level. Today the S&P closed above 1870 and is within striking distance of the old highs.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past four months, replacing MACD as the most accurate indicator. Momentum today turned slightly positive.
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 Apr 7. MACD took a big jump higher today and is on the verge of issuing a buy signal if tomorrow stocks move up.
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 now positive and definitely overbought.
Rate Of Change is set for a 21 period. The rate of change is turned positive to neutral finally.
For the Slow Stochastic I use the K period of 14 and D period of 3. Today’s action was enough to move the Slow Stochastic into signaling that the market direction is now up. The Slow Stochastic is no longer oversold but continues to show an uptrend for the mid-week outlook.
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 continues to follow the Slow Stochastic and issued another strong up signal for Tuesday.
Market Direction Outlook And Strategy for April 22 2014
The NASDAQ Index closed right at the 100 day exponential moving average (EMA) today. It’s a good sign but this part of the recovery is the easier part. Ahead lies stiff resistance from a lot of investors who will want out of stocks they bought before they tumbled. The IWM Russell 2000 also closed right at the 100 day EMA. The recovery from the sell-off has been impressive especially on the Dow. The S&P didn’t really dip all that far in the selling and it has recovered the best which is to be expected.
For tomorrow then the technical indicators are all turning decidedly to the upside. Both stochastic indicators are signaling that the market direction for Tuesday is higher. Momentum finally turned positive and MACD is almost ready to issue a buy signal. The Ultimate Oscillator though is showing an overbought condition which could mean that we could see more sideways action on Tuesday.
Still though the signs are all pointing to higher prices. About the only catalyst now that could stop stocks from pushing still higher would be either poor earnings numbers for the week or another dust-up in the Ukraine.
My strategy is still unchanged but I continue to take smaller positions and keep quite a bit of capital to the sidelines. Even if April manages to turn in a nice gain, I think May through August could be tough months for stocks. For Tuesday then I am not expecting as strong a day as the overbought condition will slow the advance. Still though I am expecting a positive close as the market direction bias continues to point up.
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