Market Direction this morning is following the market direction technical indicators from last night. The market direction outlook was for some selling in the morning and then a push back later in the day. Market direction has continually had trouble throughout March and April with any kind of solid follow through after big up days. Yesterday the market direction moved higher with the Dow up 152.29 points and the S&P up 16.28 points. These are good gains but once again they are followed by profit taking and investor indecision.
Investors are nervous at this stage of the rally. With stock indexes up over 10% since January when the rally started investors are playing a game of “hot potato” as they try to stay invested but don’t want to be the investor holding stocks if the market pulls back. This is why on down days, the selling intensifies.
Market Direction and AT&T Stock
The decline this morning in AT&T Stock of over 6% is a prime example. Two downgrades and investors sell out quickly worried they may be holding a stock that will turn down and leave them with losses. Any sign of trouble and investors bail, both retail and institutional.
Market Direction and Apple Stock
Another good example is Apple Stock this morning. I have already gone over the earnings and my strategy following last night’s earnings. You can review that article here. Investors were not thrilled by the earnings and the outlook yesterday so they are trying to decide whether the stock is fairly valued at this level.
The daily chart below from late February 2013 shows the trouble Apple Stock is facing. Earnings were yesterday. If the stock was going to climb it should be starting. Instead you can see that:
A. The stock is trading to the low end of the day’s range as of 1:00 PM
B. Accumulation / Distribution shows that the stock has entered into a distribution mode. In other words, there are more sellers than buyers over the past 6 trading sessions.
C. Volume today will surpass yesterday’s volume and unless it changes, sellers have the upper hand.
As long as this remains a shake-out of weak investors then Apple Stock should be able to hold support around the $400 level. But the drop just 3 trading sessions earlier down to $385.10 does not hold well for Apple Stock as it is rare when that kind of drop is not tested again. My strategy and outlook are in the Apple Stock article from last night.
Market Direction Intraday and IWM ETF Russell 2000
The Russell 2000 is a great indicator to follow on its own right. It signaled just a few weeks ago that the market direction was going to have trouble as it failed to penetrate to new highs and fell back finally hitting the 100 day exponential moving average (EMA). Today IWM is hanging tough, up a few pennies but more important, holding above the 50 day simple moving average (SMA). If it closes above the 50 day simple moving average (SMA) watch for the market direction to continue to push higher this week.
Market Direction Intraday Summary for April 24 2013
The weakness in the market direction after yesterday’s push higher is a pattern that this market has shown since the start of March. Nervousness though breeds opportunities for those of us who enjoy options. Every day I stumble upon another great trade. Monday there was Caterpillar Stock, Visa Stock and Illinois Tool Works Stock. Tuesday there was a great trade in Mondolez stock and today so far, I have been trading Clorox Stock and AT&T Stock.
This is the kind of market that I enjoy as the market direction stumbles around trying to get something started. The volatility remains high enough to keep put premiums reasonable for out of the money puts. It is just a matter of keep an eye on my watch list and looking for those stocks that are nearly ready to offer me some great opportunities. Stocks like PepsiCo Stock which have run up a bit too quickly and investors want to take their profits in and move on. These present opportunities and PepsiCo Stock is on my list for either later today or later this week.
My strategy is unchanged. I am taking smaller positions, staying out of the money, rolling down when it suits my strategy, taking profits as they develop and keeping more capital than normal to the sidelines to jump in and out when the opportunity is there. I am following my market direction technical indicators each day and basing my trades on their outlook and right now they still say to stay careful as the recent highs in the S&P and the Dow have not been confirmed as of yet and May, one of the weaker months of the year for stocks is just a little over a week away.
Internal Market Direction Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction External Links