The outlook for today was for the market direction to trend sideways with the bias remaining up. This is an ideal market for Put Selling stocks, trading them, using the Trading For Pennies Strategy and profiting from the Ultra ETFs on the market direction portfolio through the use of tight stops.
I wrote an article yesterday on 8 stock trade ideas for the second week of February. I have already entered into two of the trades I discussed as they pulled back a bit with the market this morning, making the puts ideal for selling.
Let’s take a quick look at the Dow Index to see what is happening.
Dow Market Direction Morning Comments for Feb 10 2014
The Dow is now bouncing up against resistance at the 100 day moving average. This is important for the Dow. It should break through within a day or two at most, otherwise the direction will shift back to being lower. I am not expecting the direction to shift to a second leg down, but tomorrow the new Fed Chairman, Yellen speaks and you just never know what the Fed will say and how the market will react. This is also part of the problem this morning with the Dow.
I included the momentum indicator just to show that momentum has risen dramatically over the past two days of the rally back but today it is starting off flat. This is never a good sign, especially as the Dow approaches the 100 day exponential moving average (EMA). It’s a bit like a sail boat caught in a stiff breeze. For two days the sail boat has skirted along but then suddenly the “wind” is gone from the sails and the boat hardly moves at all. Let’s keep an eye on the Dow sailboat here.
Dow Intraday Market Direction
The one minute chart of the Dow is below. You can see that at the open we set a morning high point and then within a few minute a morning low. A rally back failed to break the morning high and this lead to more selling. The selling became stronger as the market could not take out the morning high and instead it fell back, breaking below the morning low. This always brings in more selling. The selling will be both retail, institutional and definitely automated. With that amount of selling the Dow fell back to a second lower low and then after a little failed rally, a third lower low. With three lows in place, buyers stepped in and have pushed the Dow back up. Note though that the latest rally at the time of my writing this article (11:50) has again failed to break the morning high. This will lead to additional weakness.
Morning Outlook For Stocks
Overall the market rally is stalled somewhat as it faces an unknown entity, the Fed tomorrow and Wednesday. As well two strong days of rally have to be digested by stocks and that will take some time as well. The key is for the markets to not give up much ground by the close. A drop in the Dow of 50 points intraday is fine but not into the close. The Dow if it cannot squeak out a gain which places it above the 100 day EMA, should at the least close fairly neutral. If that happens then the next move should be up, depending on comments from Yellen.
Into the close I am expecting a neutral close on the Dow, S&P but not the NASDAQ. The NASDAQ is showing good leadership and should close positive. That’s all the other indexes may need for Tuesday.
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