While the Market Direction outlook for Wednesday was for some weakness in the markets but a push back towards the close and for the markets to attempt to push higher, we have yet another day without any follow through after a big gain on Tuesday. The volume is light and has been since March which would indicate that a lot of retail investors are gone from this market and institutional investors are the primary investors. The game has been buy on the dips and sell on the bounce backs. This is part of the reason why there has been no follow through after big up days as investors take advantage of each bounce higher in market direction to take profits..
Today saw selling from the open and a continual push lower throughout the day with the markets bouncing oon the Fed’s statement around 2:00 that last until 3:00 and then selling moved the market into the close. This is not the first time investors have sold after the Fed’s statements. It also shows that even the “big players” have no more insight into the market direction than the retail investors. The thinking among investors was that the Fed’s statements seemed to indicate that the economic recovery is uneven at best and the payroll tax implementation is hurting the economy. Few investors today seemed happy that the Fed was back pumping in billions every month.
There is also the “May Effect” to contend with and a lot of investors took today’s selling as a sign that the adage “Sell in May and go away” will be the mode for this year. Therefore when the selling got started a lot of investors joined in.
Market Direction Closing For May 1 2013
The S&P 500 closed at 1,582.70 down 14.97 points. The Dow closed at 14,700.95 down 138.85 points. The NASDAQ closed at 3299.13 down 29.66 points.
Market Direction Technical Indicators At The Close of May 1 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 1 2013 on the S&P 500 and view the market direction outlook for May 2 2013.
For Momentum I am using the 10 period. Momentum is continuing positive and despite today’s selling momentum is higher today than yesterday.
For MACD Histogram I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on April 26 but today’s selling did pull back MACD although the buy signal is still valid.
The Ultimate Oscillator settings are Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
The Ultimate Oscillator is still positive but has fallen away from being overbought.
Rate Of Change is set for a 21 period. Rate Of Change is positive and climbing indicating that even though the market direction was lower, there were buyers actively picking up stocks.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is overbought and is still indicating that the market direction is higher. As it looks out more than a day or two this could be a good sign for the market direction to be moving back higher by week’s end.
For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is overbought but it indicates that the market direction will be lower tomorrow.
Market Direction Outlook And Strategy for May 2 2013
The question for tomorrow will be whether the market direction will bounce with the return of the dip buyers or whether it will move lower. The market direction technical indicators are still primarily positive and momentum, rate of change and the slow stochastic are all pointing to the market direction moving back up. The Fast Stochastic is pointing to lower and MACD and the Ultimate Oscillator are pointing to sideways with a bias to lower.
The most interesting from today has to be momentum which actually climbed despite the selling and the rate of change that indicates that while stocks were falling, investors were busy buying.
The decline in commodities though, I think, are advising investors that the economies of much of the world are slowing. Revenue was poor this quarter and I have mentioned this numerous times and how rising revenue is what the market direction needs to be able to move higher.
The consensus is that tomorrow will see more selling but the market will still attempt to rise. Into this market I have continued my Put Selling, selecting specific stocks and staying out of the money. I have closed a lot of puts and opened new ones. I am taking advantage of stock moves higher to buy back naked puts for profits and release my capital for more Put Selling.
At present then, the market direction higher looks to be in poor shape but a move lower more than a percent is slim at present. Tomorrow should be an intriguing day.
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