Market Direction ended the week as expected, with the market being weak but continuing to push higher. Investors remain jittery but at the same instance want to stay invested as they believe the market direction has higher to move. The strategy for most investors has been to buy the dips and so far this year it has paid off. On Friday the S&P reached the highest level since the intraday high back in October 2007. Both the Dow and the S&P 500 moved higher by the close ending the month of March 2013 with slight gains and per my market direction article from last weekend entitled “Pivotal Week“, the S&P market direction higher has put in place the markets for April.
Market Direction And April
April is one of the better months for stock exchanges, historically. Since 1950, April has been the best month for the Dow although in recent years January is replacing April as the best month for stocks. In April 1999 the Dow gained 1000 points in April, a feat never matched before or since. The worst years for April have been 2002, 2004 and 2005. The first week of April often can be weaker than the rest of the month. As well many technicians feel that April enthusiasm often pushed market direction too high in the month which leads to weak periods in May and/or June which is why the phrase “sell in May and go away” is often repeated.
April this year will be unique as the Dow and S&P 500 are sitting at 5 year highs. It should be interesting to see if April can continue the market direction higher. Earnings start shortly with Alcoa kicking off earnings seasons on April 8.
Market Direction Closings
The S&P 500 closed at 1569.19, up 6.34 points and the Dow closed at 14,578.54, up 52.38 points. The NASDAQ closed at 3267.52 unchanged for the day.
Market Direction Technical Indicators At The Close of Mar 31 2013
Let’s take a moment now and review the market direction technical indicators at Friday’s close on the S&P 500 and view the Monday’s outlook.
For Momentum I am using the 10 period. Momentum is still positive but Friday’s move higher saw momentum pull back.
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) is still negative and the sell signal is still active. This shows that despite the move higher, there are not enough participants in this latest push and MACD continues to reflect the concern of investors. Despite this, if Monday the market direction is higher, MACD should finally turn positive and issue a buy signal.
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 positive and has pushed into overbought territory. There is still plenty of room for the Ultimate Oscillator to move higher but it will need more buying to support this latest push.
Rate Of Change is set for a 21 period. Rate Of Change is still positive. On Thursday it took quite the tumble and on Friday it is up but not a lot higher than Thursday, which again shows the hesitation among investor.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is once again overbought to the extreme but is still signaling there is room for the S&P to move higher.
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 also extremely overbought and it too is signaling market direction will be higher on Monday.
Both the Slow Stochastic and Fast Stochastic have confirmed their market direction up signals.
Market Direction Outlook And Strategy for April 1 2013
The market direction outlook for Monday then is for the S&P 500 to continue this slow grind higher. Since the start of February 2013, the S&P 500 is up 3.7% and since the start of March it is up 3.5%. This shows that the month of February was not strong despite a very slight gain. Instead it has been March which has seen a bit more conviction on the part of investors that the market direction remains up.
There are lots of problems facing this bull market and at present a lot of support from the Federal Reserve. Make no mistake. When the Federal Reserve pulls the liquidity back from this market, it will face enormous headwinds and I for one will want to stand aside and see how the market direction reacts. Until then though the party continues on Wall Street and it has been a wonderful party indeed. I am expecting market direction to remain weak but continuing to push valuations higher on Monday.
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