The market direction outlook for Tuesday was for stocks to be mixed which is exactly what investors got. Stocks dipped in and out of negative territory throughout the day while investors took profits and realigned many positions. Volume was down by about 100 million shares. Overall there is no concern among investors shown with the VIX Index dipping today to 10.99. We are now into the second week of June and the Dow and S&P have reached record highs. The NASDAQ is back within 33 points of its 52 week high and the Russell 2000 is far above the 50 day simple moving average (SMA) although it still has ground to cover to reach its 52 week high.
The Commerce Department said US whole business were increasing their inventories in April by about 1.1 percent (which follows the same gain for March) which is seen as a sign that wholesalers expect stronger product demand in coming months.
Family Dollar Stores Stock
Carl Icahn’s announcement of purchasing Family Dollar Stores stock sent the stock soaring on Monday although the stock closed well off its highs. Today the stock closed at $68.05 but still off its lows. Momentum dipped a bit today but that is to be expected. Personally I think the only strike at present worth considering for Put Selling is the $60.00 strike as it is easily defended. Still though Icahn has a record of being able to maintain momentum in stocks.
Clorox Stock Weekly Chart 2011
In Feb when Icahn announced his move into Clorox Stock it had an initial jump. At that time Icahn indicated he believed Clorox Stock was undervalued. It took 6 months for the stock to move back to retest the valuations prior to his announcement.
Still though, today Clorox Stock is trading above $90.00 and rumors of acquisition or a merger has options being sold at incredible numbers. I myself did 2 trades today in Clorox Stock.
It may therefore take months for Family Dollar Stores stock to pull back to $60.00 or it may not happen at all this year. It is however worth keeping on the watch list and I will be taking any opportunity to sell puts at $60 for reasonable returns if it should happen.
Market Direction S&P Intraday Chart June 10 2014
The intraday 1 minutes chart for June 10 shows choppy action. The morning saw the low for the day by 10:00 AM and then once again another Trading For Pennies Strategy trade around the 10:00 to 11:00 AM time period. This is a daily occurrence and investors should take note who are looking for some trades on the SPY. The afternoon saw a slight decline but no real serious selling of any kind. Then investors pushed stocks higher into the close for the day.
Advance Declines For June 10 2014
With the mixed action today the new highs really fell off. New highs were just 138 and new lows an incredible 4. Yes that’s right, just 4 new lows. This is why the VIX Index fell again by the close. There is just no selling pressure. Advancing issues were just 41% while declining issues were 55%. Up and down volume was exactly 49% each. Today was just a mixed day much of it brought about by the overbought condition of the market.
Market Direction Closings For June 10 2014
The S&P closed at 1950.70 down 0.48. The Dow closed at 16,945.92 up 2.82. The NASDAQ closed at 4338.00 up 1.75.
The Russell 2000 was down just 23 cents to closed at $116.67. All the indexes are in good shape and well above their respective 50 day simple moving average (SMA).
Market Direction Technical Indicators At The Close of June 10 2014
Let’s review the market direction technical indicators at the close of June 10 2014 on the S&P 500 and view the market direction outlook for June 11 2014.
There is only one thing new to mention in the support levels. The movement sideways today is simply a reaction to the overbought condition in the market direction up. However if we see a few more sideways days we should watch to see if the market attempts to place a support level at the present high. If investors are unwilling to sell at the present level we could see a support level put in place. This is a rare event, but it has happened in markets in the past. If we look at the chart above you can see a small sideways action at 1919 from which the market launched itself higher. Markets have been known to put in place steps to move higher when investors are unwilling to sell and believe stocks have higher to move. While not true support, steps can still assist the market is trying to push higher.
With the market continuing to break into new all-time highs, there are now four key support levels in the market. Long-term support is at 1750. If that level should break at this point, it would mean a significant correction would ensue. The second level of support is at 1775 which again is good support and if it broke would mean that the market direction would quickly collapse down to 1750. These two indicators are good values to use for longer-term trading. As long as stocks stay above these levels, there is no concern the markets will experience any kind of severe pullback. The 1775 and 1750 levels are both now below the 200 day exponential moving average (EMA).
The next two levels are at 1840 and 1870. At this point with the S&P above 1900, any pull back to 1870 would be a signal to pick up short instruments like the SDOW or SQQQ ETFs or spy put options. If 1870 were breached it would mean a further break lower to at least the 1840 level and for investors it would be a quick and easy trade to pick up short products to enjoy some profits down to 1840. If 1840 were to break at this point it would mean to roll any at the money puts lower and roll down covered calls but only if 1840 were to break. Between 1840 and 1775 there is very little to no support.
My outlook for a pull-back is unchanged. I still expect to see the market test to find support at some point over the summer months and with no support in place except at 1870, I believe the market may try to build support at 1919 or between 1919 and 1870.Unless the market can break through 1870 I see no reason to reign in my trading activity.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past five months, replacing MACD as the most accurate indicator. Momentum is positive and strong.
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 buy signal on May 23. The MACD signal continues to point to higher valuations in the S&P although the signal is slightly weaker today.
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 continuing positive and remains extremely overbought.
Rate Of Change is set for a 21 period. The rate of change remains positive and is still supporting the recent break out of the S&P above 1900.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction down and it is extremely overbought. The differences between the two signals (K and D) are slight which points to more sideways than much of a down move for stocks.
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 that the market direction is down and it too is extremely overbought. The divergence between the two signals (K and D) is slightly more with the Fast Stochastic so we could see a more negative close tomorrow.
Market Direction Outlook And Strategy for June 11 2014
The market direction technical indicators are still 4 to 2 that stocks will continue their advance. There has been no change in my trading. I am continuing to trade but staying far enough out to assist in the event that stocks pull back somewhat. I am not expecting a major correction. There are no signals that a major correction is about to occur. Instead I am looking for the market direction to pull back to consolidate recent gains and prepare to push higher.
The problem is we may not see much of a pull back beyond 1919 on the S&P as investors are enthused over stocks and will most likely continue to buy the dips which is what keeps the market direction up. For the bears at this point to get anything going they need a catalyst to the downside. They might get it with the start of the next quarterly earning on July 8 when Alcoa unofficially starts the next quarterly reporting. But until then stocks may continue to try to push still higher.
Since May 20th, there have been 14 trading days. Aside from today there have only been two down days in which only marginal losses were felt. Today marks the third day of a mixed direction but in the end just the S&P and Russell 2000 had down days and again just marginal. The analysts calling for a severe correction of more than 15 to 20 percent have to be wondering as we are heading into mid-June shortly and there are few if any signs of anything more that a simple test for support occurring.
For Wednesday with 4 to 2 in favor of advancing, stocks may be a bit weak but they look ready to close slightly higher.
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