The outlook for today was for stocks to continue to move higher and try to confirm a change in the trend from down to up. The tensions have eased between Ukraine and Russia but whether the crisis is actually over is a tough call. Putin is a very determined individual and retaking Ukraine would fit into his plans as well as his popularity at home. For now though the crisis seems to have averted and investors are back buying stocks.
Market Direction SPX Morning Chart
The one minute chart for this morning sows a steady climb above 1920. The morning saw stocks shoot up past 1938. When that level held, more buyers arrived and stocks continued their advance. By 11:30 the S&P had reached 1945 before pulling back slight as stocks headed into the lunch hour.
10 Day S&P market Direction Chart
The 10 day chart is better to review so we can get a “bigger” picture of what is happening with the present pullback. You can see that 1930 was the level reached just before the news of a possible Russian invasion of Ukraine unglued investors and stocks pulled back falling another 20 points down to 1910. As is typical in bull markets the pullback to 1910 brought in buyers who felt that many stocks were hammered sufficient that profits could be made by buying around the 1910 area. On Friday then stocks shot up and closed just above 1930 for the best rally since March 3.
Today the rally is continuing but after gaining about 10 points the market is starting to drift sideways. Again this is typical of a rally off a deeply oversold condition. The first day has the big jump and the second tries to consolidate those gains to push higher.
Tuesday August 12
This is why tomorrow, Tuesday August 12 will be important. If the market drifts sideways on Tuesday, then the chance of the market moving back lower is very high. If however the market today can gain more traction and close about 1956, then the downturn has all but been wiped out.
I am in the camp that this is a bounce and more selling will start shortly, especially if stocks cannot push higher simply because those investors who bought shares on Friday will want to get out if the market slips back below 1930.
SPX Market Direction Outlook Into The Afternoon
For the afternoon the market direction looks steady and the SPX appears it might hold the 10 point gain from the morning. I am expecting some selling in the afternoon, primarily because there was so little selling in the morning.
At noon volume is just 1.1 billion shares but of those shares being trading 83% is up volume and 81% of all stocks are advancing. These are good signs. If they deteriorated in the afternoon, then the chance of the market closing below 1940 is quite high.
A close below 1940 on the second day of the rally would be taken as a bearish indication by most investors, myself included.
Watch for weakness in the afternoon but then a push to try to closed above 1940 for the day.
Internal Stock and Option Trades Links
Put Selling Strategies For Members
Covered Calls Strategies For Members
Profit And Income Strategies Index
Stock and Option Strategies For Members
Stock And Option Trades Explained For Members