Market Direction Intraday For Jan 21 2014 – Worry Continues

The market direction outlook for Tuesday was for stocks to trend sideways but with a slight bias up. That bias up did not last long. In my comments for the market direction for Tuesday I indicated that while investors are bullish, 59% at last survey, the market must get going. It must be pushed higher or it will correct and fall lower to find buyers. If there is a correction it may surprise enough “bullish” investors that it may fall further than most would expect.

Last year there was hardly a correction over 5%. This drew in a lot of investors in 2013. They are not ready for a deep correction this year. The continuing sideways pattern since the start of January does not seem to have concerned many investors. Personally I am concerned because the sideways action really does need more strength so that each day investors see a little bit of an advance. Even if the S&P was up a steady 1.5% or 2% by now, that would add greatly to confidence to keep buying.

What is happening at present is investors are playing the game of musical chairs. No one wants to be the “odd person out” in this game. Therefore anytime stocks move up investors buy cautiously but any move back down and they dump the previously bought shares immediately. They do not want to be left holding shares only to find out that the market is in fact putting in a top here, but just taking its time doing it.

Then when the selling slows and the market is back down investors look to the low points like “stocks are on sale” and jump back in again. They look upon each pull back as an opportunity to buy more, BUT they also are trying to find investors to buy stocks at higher prices when the stocks push back up. That is not happening and each time stocks push higher the buyers are simply gone. Stocks then fall back again and another round of selling appears.

So we have a pattern that has a bottom, a mid-range and a top and until earnings can support higher prices or a different catalyst is found, stocks are going to continue to have trouble here and trend sideways stuck within those 3 levels.

S&P Intraday Market Direction Action for Jan 21 2014

The day’s market direction action so far has followed the outlook pretty well. The morning saw a very nice jump reaching almost to 1850 with the S&P up to 1849.31. But then a second little rally failed to break the first high and that brought in the sellers. The market quickly fell back to 1840 which you might recall has been a sore spot for the market direction acting as both support and resistance, but primarily resistance. After a few attempts to bounce off 1840 failed the S&P collapsed down to below 1834. A little rally produced not much buying and a second drop made a lower low at 1832.38. A rally is now underway and pushing back to 1840 once again as the S&P tries to retake that level.

market direction intraday Jan 21 2014

Market Direction Intraday Into The Close

I have been busy selling puts again this morning, picking positions in AT&T and AFL this morning per my articles in the Trade Ideas of the members site. I also bought back in the market direction portfolio around the noon hour. I will update all of these trades shortly. For the close I still think we have a chance for a positive close. Investors are trying hard to get this market higher. The bullish sentiment is very high, probably too high, and revenue is just okay with not very many surprises to the upside, but some surprises to the downside.

That couples with worries about the Federal Reserve tapering, budget concerns, China’s economy, a rising dollar and rising Treasury yields are having a toll on stocks. If Treasury Bonds and Notes move much above 3.5% stocks will have serious problems and a lot of investors know this.

Capital Preservation First – Profit Second

As a reminder here is my comment from another article:

Remember in a market like present, capital preservation is the priority. The profit earned is secondary to the risk to capital. At the end of a tumultuous year you want to look back on your trades and see how much capital was never at risk and then how much your return was. I aim for 12% each and every year. Any return above that I consider a terrific gain, but preserving my capital is the most important aspect of my investing.

The close today I expect will be slightly positive. I will update all my trades including the market direction portfolio throughout the day. Enjoy the afternoon.

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