Market Direction on Friday saw the Dow squeak out a gain but the S&P and NASDAQ ended slightly lower. But for the week the S&P 500 was up 1.7 percent recovering much of the previous week’s 2.1 percent loss.
Friday’s market direction was highlighted by the GDP report which showed the US economy expanded by 2.5% in the first quarter which was below expectations for 3% growth. To add to the sour mood, the University of Michigan consumer sentiment slipped to a three month low. Market Direction basically was flat on Friday with much of the day spent in a sideways trend.
Market Direction News For April 26
Gold fell yet again, moving down $8.80 and taking Barrick Gold Stock down by 3.3 %. Amazon stock fell 7.2 % after its forecast for second-quarter earnings were below expectations. Meanwhile JC Penny Stock which has been pummeled by investors jumped by 11.6 % when billionaire George Soros indicated he had made a substantial investment within the stock.
Market Direction S&P 500 April Chart
Reviewing the month of April you can see in the daily chart below that the S&P 500 has been trapped in a range. If the range fails to break out to the upside this week, then I believe the market direction will pull back. This week is important then for the S&P 500 as we are entering into the weakest 6 months of the year from May to October. Keep an eye on the market top to the right. If it break down, I will be purchasing puts on the SPY ETF or perhaps an ultra short ETF such as Doug Harris has been doing with his market direction portfolio.
Market Direction on the S&P 500 for April 2013
Market Direction and IWM ETF Russell 2000
The Russell 2000 is setting up a familiar pattern here of lower highs and lower lows and has been following this pattern since mid-March. The S&P 500 has been struggling but perhaps we can see now why. The IWM ETF which represents small to medium size business has been unable to recapture the highs seen in March 2013. Again this week is pivotal for if IWM continues to pull back we could see a lot more selling going into May. It will be impossible for the S&P 500 to move much higher while the IWM ETF remains a drag on the overall market direction.
Market Direction and the IWM ETF
Market Direction Closing For Apr 26 2013
The S&P 500 closed at 1,582.24 down 2.92 points. The Dow closed at 14,712.55 up 11.75 points. The NASDAQ closed at 3279.26 down 10.72 points.
Market Direction Technical Indicators At The Close of Apr 26 2013
Let’s take a moment now and review the market direction technical indicators at the close of Apr 26 2013 on the S&P 500 and view the market direction outlook for April 29 2013.
For Momentum I am using the 10 period. Momentum is still slightly negative but almost more neutral than anything else.
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 sell signal on Monday April 15 but on Friday it issued a possible buy signal as it turned positive near the close. It will need another day though to confirm whether this buy signal is anything more than just neutral.
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 was lower on Friday after being in overbought territory yesterday.
Rate Of Change is set for a 21 period. Rate Of Change is positive but is back to flat which again indicates lack of investor interest in committing more capital.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic 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 higher by mid-week.
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 also is still indicating that the market direction will be up on Monday.
Market Direction Outlook And Strategy for Apr 29 2013
This week is a make or break kind of week for the S&P 500. The market direction must break through and push higher otherwise there is only one way to go and that is down. We are heading into the weakest 6 months of the year and the last two months have not really been that profitable for those investors who are holding the S&P 500 index funds. Market direction has been more sideways than up lately. One day market rallies have failed to have much follow through.
Earnings have been okay but considering how estimates were set this quarter, it is not surprising that earnings managed to meet estimates for many companies. That said, revenue growth was poor for the majority who have reported so far this quarter. So what is holding the market direction here? My opinion is the Federal Reserve monetary policy is so accommodating that there is little point in fighting the Fed policies. They are determined to keep pumping in liquidity so while the market direction is stuck here, investors are reluctant to get out of the stock markets as they believe the direction is still higher for the indexes just based on the fact the Fed is keeping interest rates so low that there really is so few places to invest.
My strategy is unchanged as I continue to stay using smaller positions, taking profits constantly, rolling when needed and keeping larger amounts of cash to the sidelines as we get ready to enter into May. If there is selling it is questionable how low the market direction could actually go in May and June with the Fed continuing to effectively put a major put on the stock markets. It would appear the “Bernanke Put” is very much in control of stocks almost 5 years after the bear market ended in March 2009.
The market direction technical indicators are somewhat mixed but overall the consensus is that the market direction should be able to push higher on Monday. This being the make or break week for stocks as we head into May, I won’t be surprised by some weakness in the morning or early afternoon but an attempt later in the day by investors to push market direction higher. The Russell 2000 (IWM) is warning that stocks are having trouble here, but as most investors seem pretty determined that stock valuations are going to move higher, the selling is muted when it does occur. This means Put Selling on dips remains probably one of the better strategies for the market place until we get a clear signal one way or the other. So it has been quite the lackluster two months after the big rally higher in January and February. Stuck more sideways than anything else, this really is a make or break week for the market direction. If stocks cannot get going here than they should pull back further than the last 2.1% correction to build better support. Right now though investors seem content to be traders as they buy on the dips and then sell on the little rallies back up. This cannot last so May should make for a very interesting month.
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