The market direction outlook for Monday was mixed with a slight bias to the upside. Instead we got a large bounce to the upside off Citigroup earnings that blew past estimates and then stocks turned mixed into the afternoon. Nonetheless it was a decent start to the week. On Tuesday Yellen begins two days of questions from congress. There are a lot of earnings being released this week that are worth watching. Tuesday we get Intel. Wednesday is Bank of America. Thursday earnings from Google are on tap and on Friday we find out how good General Electric earnings are. Combine this with Janet Yellen’s questions and answers session and the Weekly Initial Unemployment Insurance Claims on Thursday and we have the makings of what could be a week of higher prices.
Market Direction S&P Intraday Chart July 14 2014
The one minute intraday chart for July 14 below gives us a good idea what transpired on Monday. The market jumped at the outset, then within minutes there was a slight dip which brought the SPX to 1976.26 and from there the market direction pushed back higher. By shortly after 11:00 investors had pushed the index almost to 1980. From there the market declined through the rest of the day until into the close it was back testing the morning low. A slight bounce into the close pushed the S&P above the morning low to close at 1977.10 but well off the morning highs for the day. Basically all the action was in the first few minutes of the open. The rest of the day investors were sitting with a wait and see outlook ahead of Janet Yellen’s trip to congress on Tuesday and Wednesday.
Advance Declines For July 14 2014
Volume was excellent in the morning but once the 11:00 AM high was put in, volume slowed. In the end today’s volume matched Friday’s with 2.7 billion shares traded. Up volume came in at 65% versus 33% down. 62% of all stocks were moving higher on Monday while 35% were moving lower. Volume continues to be somewhat poor although with summer in full swing, volume tends to be poorer.
Market Direction Closings For July 14 2014
The S&P closed at 1977.10 up 9.53 and off the highs for the day. The Dow closed at 17055.42 up 111.61 and back above 17000. The NASDAQ closed at 4440.42 up 24.93.
The Russell 2000 IWM ETF closed up 59 cents at $115.69.
Market Direction Technical Indicators At The Close of July 14 2014
Let’s review the market direction technical indicators at the close of July 14 2014 on the S&P 500 and view the market direction outlook for July 15 2014.
Stock Chart Comments: If you look at the chart above you can see the levels marked A, B, C and D. I explained in the past few market direction outlooks that these levels show a pattern or reaching a new high and then a slight pullback and then another move back up. Today at point D, we can see that the similar pattern which has been dominant in the past is now back once again. If this pattern holds true here, stocks will move higher and break the previous all-time high.
Support levels at present are 1956, 1930 and 1919 which are all light support. 1870 and 1840 are strong support. 1870 and 1840 at present mark important trading levels for investors. Both are now below the 100 day exponential moving average (EMA) so any pullback this summer which breaks 1870 should be used as a signal to commence picking up ultra short ETFs or spy put options 2 months out for a bigger move lower. A break below 1840 at present would challenge the 200 day EMA.
I have repeatedly mentioned two other support levels, namely 1775 and 1750. As the market continues to push higher, these are now critical support levels. 1775 is important but 1750 is now the bottom line. A break of 1750 would mark a severe correction of 11% at present which 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 as there are no signs of any impending correction of that magnitude.
My Pullback Outlook: I have been waiting for a pull-back this summer to between 1870 to 1919. At present even though the market seems weak, you can see in the chart above that we are simply experiencing some weakness after setting another new high. This pattern of setting a new high, then pulling back and then rallying higher has been repeated often over the past several months. Therefore the pullback I am looking for is not being signaled at present. That does not mean we will not get a pullback but it does not look like any such pullback will begin this week. Indeed this week actually looks more like stocks will move higher still.
Overall there are still far too many analysts expecting a pullback, in my opinion. It is rare when the majority of analysts are correct so we may not experience a downturn yet. When most analysts are bullish, and many bears have joined them, that would be the time for a pullback in my opinion.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator over the past eight months, replacing MACD as the most accurate indicator. Momentum is still positive and moving sideways..
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 sell signal on July 8 and the sell signal is still active today but weakening.
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 positive and continuing sideways. It is slightly overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change remains positive and is turning back up.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling that the market direction is back to up for mid-week.
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 has now changed to an up signal for Tuesday.
Market Direction Outlook And Strategy for July 15 2014
For Tuesday the Market Direction Technical Analysis shows just one technical indicator with a weak sell signal, namely MACD. All the other technical indicators are positive. The change from the two stochastic indicators from negative to positive is a good signal that stocks will most likely continue to rise for Tuesday and possibly Wednesday.
The outlook for Tuesday then is not as mixed. Instead the pattern looks like it is back to higher for the S&P market direction.
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