Market Direction today continued higher. As explained in last night’s market direction outlook for today I indicated that the market has been consolidating which means a push higher. The S&P 500 today closed to within 2 points of its closing high from September 2007. Despite being overextended and definitely overbought the strength within stocks certainly means that any pullback at this point will be a buying opportunity. The market direction can only continue moving higher for so long before there will be a catalyst to derail the run-up and cause a stalling or even a larger pullback than expected. It could easily be Europe again or problems out of China. But the trend remains bullish and if expectations are met with the next quarterly earnings the markets could move higher than anticipated at present.
Market Direction Action For Today
The big news today was the drop in Weekly Initial Unemployment Insurance Claims to 332,000. In a note from chief investment strategist Fred Dickson of Davidson Cos., he indicated that as a percent of the U.S. workforce the weekly unemployment claims had fallen to a level last seen during the strong expansion phase of the prior two economic expansions in the US. Again this could mean that the next month’s unemployment numbers if better than February would begin to cause the rumor about the Fed easing up on liquidity to surface again and that could stall this rally further. This is somewhat unlikely but it is something to be aware of.
Market Direction Closings
The S&P 500 closed at 1,563.23, up 8.71 points and the Dow closed at 14,539.14, up 83.86 points. The NASDAQ closed at 3,258.93 up 13.81 points.
Market Direction Technical Indicators At The Close of Mar 14 2013
Let’s take a moment now and review the market direction technical indicators at today’s close on the S&P 500 and view the next trading day’s outlook.
For Momentum I am using the 10 period. Momentum is positive and back climbing following today’s action.
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 still positive and the buy signal remains active.
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 overbought and continuing to climb higher into overbought territory. As explained in last night’s market direction outlook and previous weeks as well, the overbought nature of the Ultimate Oscillator at present is desirable to keep strength within the push higher.
Rate Of Change is set for a 21 period. Rate Of Change is still positive and after being flat for several days is starting to climb again today.
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 is still signaling that market direction is neutral.
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 but it is indicating the market direction still is back up.
Market Direction Outlook And Strategy for Mar 15 2013
The market direction outlook for the next trading day is to see perhaps a weak start but then a push for the S&P 500 to set a new all-time closing high. The slow stochastic is signaling that early next week we could see the market direction stall which would not be surprising if the market direction pushes to a new high on Friday. It is options Friday but the volatility of options expiring has not had the impact it did years ago before weekly options were as widespread as today.
My cautious stance is being upgraded as I am now placing more capital back into selling out of the money puts. Today I sold puts on Nucor Stock, Bank Of Nova Scotia and Caterpillar Stock. I am looking at other possible trades for April options expiry. I will not be surprised to see some weakness next week but I do believe April could see higher highs in the S&P 500. It will then be questionable whether the market direction will be “sell in May and go away”. The stock markets have had a string of good news which has assisted the market direction to move higher. There are bound to be clouds soon which will test the market direction. I plan to be there enjoying some good Put Selling opportunities as they develop.
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