The market direction outlook for Thursday was for stocks to move higher if the announcement out of the ECB was for lower interest rates. The ECB did just that and stocks ended the day closing at new all-time records in both the Dow and the S&P. However the NASDAQ had the best move of the three major indexes moving up 1.05 percent.
Weekly Initial Unemployment Insurance Claims
The Weekly Initial Unemployment Insurance Claims came in at 312,000 which is still well within the target for the market direction to not enter a severe nose-dive according to the market timing system I use which is based on the Weekly Initial Unemployment Insurance Claims. For investors unaware of that market timing system here is the link.
May Employment Numbers
Friday is the biggest catalysts the markets face every month, namely the previous month employment report. For May analysts are estimating that 219,000 new jobs were created. If the number is correct, it will point to continued growth in the US economy. The non-farm payrolls are probably the best indicator available to provide a check-up on the health of the US economy.
Market Direction S&P Intraday Chart June 5 2014
The intraday chart for June 5 shows the indecision among investors at the open despite the drop in ECB interest rates. By 10:17 the S&P was down to just below 1924 and then commenced a rally that moved the S&P 16 points to 1940 by mid-lunch hour. The afternoon saw no sell-off and investors closed the day at a new all-time high.
Advance Declines For June 5 2014
New lows continue to drop. Today just 19 stocks made new 52 week lows. New highs however came in at 296. The rise in new highs is what the market direction needs to see daily now to keep the rally alive. 76% of stocks were advancing while 21% were declining. 2.2 billion shares were traded higher and just 795 million were traded lower. Volume overall was up slight to 3.1 billion shares, over Wednesday’s 2.8 billion.
Market Direction Closings For June 5 2014
The S&P closed at 1940.46 up 12.58. The Dow closed at 16,835.11 up 98.58. The NASDAQ closed at 4296.23 up 44.58
The Russell 2000 finally had a big rebound day and jumped 2.1 percent moving higher by $2.36 to close at $114.78
Market Direction Technical Indicators At The Close of June 5 2014
Let’s review the market direction technical indicators at the close of June 5 2014 on the S&P 500 and view the market direction outlook for June 6 2014.
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 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.
At present I am still expecting a pull-back to look for support around the 1897 level, however if you look at the chart above you can see that the S&P may be trying to create a support level around 1919. At present however there is no support at 1919 or anywhere above 1870. The market is now up 70 points above support.
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.
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 today continued moving higher which indicates more fresh capital is coming into the market. This is typical when the S&P breaks out as it has done over the past two days.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is neutral and it is extremely overbought.
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 now neutral and it too is extremely overbought.
Market Direction Outlook And Strategy for June 6 2014
The biggest catalyst the markets face each month is the jobs numbers. For Friday it is a tough call as to what the jobs numbers could bring. The market direction up is heavily overbought. It is so overbought that the two stochastic indicators cannot move higher and the Ultimate Oscillator is giving extreme overbought readings as well.
In my opinion the market direction up will pull back but technically the indicators are split with two being neutral and four moving higher. There are no sell signals. Still my personal outlook is that the jobs numbers may move the market higher on Friday but the overbought environment cannot continue and stocks will pull back.
I have been wrong before and indeed I have seen other markets with extreme overbought conditions, keep climbing.
For Friday then I believe the jobs numbers may push the market to the upside but overall the overbought environment will end the day with a negative close. It really is all about the jobs numbers.
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