Market Direction on Friday got a boost from the excellent employment numbers.The S&P 500 closed up half a percent and is within 1 percent of a new record high. Meanwhile the Dow market direction also pushed up half a percent and brought that index to another fourth record high. The tech heavy NASDAQ index closed up but not as high as the other two main indexes. This latest push in market direction has been led by the Dow index which appears to have taken the lead from the NASDAQ.
Market Direction and Jobs
The boost of 236,000 jobs in February, almost double the previous month dropped the unemployment rate to 7.7 percent. Gold moved up $1.80 to $1,576.90 and oil continued to recover moving up another 39 cents to $91.95 a barrel. The unemployment news presents a two-edged view. The numbers show that the US economy may be performing better than anticipated and indeed Bill Gross of Pimco updated his outlook for economic growth to 3 percent rather than the original estimate of 1.75 percent. At the same time this brings about the question of whether the Fed will reduce bond purchases as the economy continues to mend. This reduction in liquidity could have far-reaching effects on stock valuations.
Market Direction Action For Today
Two charts worth looking at are the S&P 500 and the Dow Jones for March 8, intraday set for 5 minute time frames.
Market Direction and the S&P 500
Below is the S&P 500. The opening saw an enthusiastic response from investors who pushed the market direction up to 1551.65 (Point A). Then as investors starting to question how long before the Fed pulls the liquidity train away the S&P sold off pushing to the low of the day at 1542.94 (Point B). This pushed the S&P 500 into the red as it fell below Thursday’s close of 1544.36.
From there the S&P 500 staged a slow grinding recovery which eventually saw it close at 1551.18 (Point C) just slightly below the morning high.
Market Direction and the Dow Jones Index
The Dow index saw almost an identical chart on Friday. The unemployment news pushed the Dow to a new record high at 14413.20 (Point A) and then the selling pushed the Dow market direction down to 14334.60 (Point B) which unlike the S&P 500 was still above the morning open, a bullish sign.
The market direction on the Dow was another slow grind higher until the market closed at Point C 14397.10 which was still below the opening morning high.
While both managed respectable closings all the action was within the first 5 or 10 minutes and the rest of the day was spent recovering from the early morning sell-off. While nonetheless bullish, this is not the type of action that breeds investor confidence. Indeed if anything, this type of action tells me that there is a good chance we are going to retest the support levels within both indexes before moving significantly higher.
Market Direction Closings
The S&P 500 closed at 1551.18, up 6.92 points and the Dow closed at 14,397.07, up 67.58 points. The NASDAQ closed at 3244.37 up 12.18.
Market Direction Technical Indicators At The Close of Mar 8 2013
Let’s take a moment now and review the market direction technical indicators at Friday’s close on the S&P 500 and view the next trading day’s outlook.
Overall there are a few significant changes.
For Momentum I am using the 10 period. Momentum is still positive but it is levelling off suggesting that not too many investors are interested in owning more stock at this level in the market.
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) is positive and the buy signal remains active. The MACD readings are continuing to climb supporting the outlook for higher prices.
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 overbought. Eventually some selling will have to enter the market direction to reduce the overbought pressure, otherwise any move higher from here will be suspect.
Rate Of Change is set for a 21 period. Rate Of Change is still positive and it is trying to climb higher. This is bullish for market direction continuing higher.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought to the extreme and while it is signaling that the market direction is still higher, the K and D percentages readings are so close as to suggest a market direction sideways is more likely than a lot higher..
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 also extremely overbought and again while not quite as neutral as the slow stochastic it is indicating that the market direction push higher may be difficult to sustain for much longer without a rest.
Market Direction Outlook And Strategy for Mar 11 2013
The market direction outlook for Monday is for the market direction to try to continue to push higher, but the pressure to move sideways is once more building. Overall the markets still need a rest to have strength for a sustained rally higher. If the market direction does not rest over the next couple of days, any move higher should be viewed with suspicion until the market direction shows it can hold support at present levels.
The market direction pull back which started Feb 20 and lasted only until Feb 25 was not enough to build strong support. As well the S&P 500 has had 6 up days in a row which, while not rare, is uncommon to repeat beyond 7 days. Therefore I will not be surprised to see the market direction either squeak out a small gain on Monday or pull back.
The Market Direction Technical Analysis Indicators are mixed once more. 3 of them are neutral with a slight bias to up and 3 are indicating that the market still has room to push higher. Because of this the stance has to remain on the bullish side but my strategy of staying cautious still is warranted in my opinion.
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