Market Direction intraday is having a tough time. The biggest problem facing the market direction moving higher is the overall height of the market. A report out of Zacks that stocks can easily move 10% higher from here before they are “fully valued” is of no assistance to investors at this stage of the rally. The rally has pushed the S&P 500 up over 7% since the start of the year with no correction. This type of rally is extremely rare and eventually a correction will have to occur. The problem investors face is knowing when it will occur and what stocks will be hit the most. This is keeping investors on edge. Meanwhile the thought of the US budget cuts starting in two weeks time is another obstacle to the market direction continuing to climb.
Last is the Dow Index itself and the 14000 level. While not a major technical point, it is a psychological one. Let’s look at this chart to see the market direction uptrend problem being faced presently.
Market Direction And Dow 14,000
If we look at the Dow Index over the past 30 days we can get a clear picture as to the problem the market direction is facing in its push higher. I have marked on the chart below the key aspects to be watching.
A. The Dow has been unable to decisively break through 14,000 and has retested 14,000 on the index 8 times which includes today. This can’t last and if it is unable to break through today I am of the opinion the market direction will begin to correct. It’s just an opinion and not backed by anything other than my experience of market’s that tend to top. This is far too long for the DOW Index to be stalled out.
B. Momentum has really fallen off dramatically since earlier in the rally.
C. Yesterday’s momentum was a good start to recover the upside but as you can see from today, there was no follow through. The Dow is stuck and without growing momentum it will be hard for the market direction to climb a lot higher.
D. A sell signal was issued by MACD on Feb 8 and even with yesterday’s push higher, the sell signal is gaining strength.
E. The Ultimate Oscillator was much more overbought earlier in the rally.
F. Yesterday’s overbought signal was much lower than previously. To move higher needs conviction and without that conviction the market direction will eventually fall back to where investors are interested in buying stocks again.
Market Direction and Dow Index
Market Direction Intraday Summary
I am of the opinion that there is more pressure to the downside than to the up on the DOW. It’s impressive to think that it has been able to tread water this long at the 14,000 level but it has been too many days without success. Stocks are being traded daily for small gains. Dips in stocks are being bought and then sold when they stocks bounce higher even for 25 or 50 cents.
Many analysts are indicating that they believe this is just a sector rotation cycle and the market direction up will shortly resume. They could of course be right, but I have not seen a market struggle for this long without being able to break through decisively and move higher.
Headwinds remain but if the US Budget cuts are delayed again that could give the market direction the catalyst it needs to move higher. Until then though the Dow Index looks like it needs to rest before trying once again to break 14,000 and then put in another leg higher in the bull rally.
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