The market direction outlook for Wednesday was for a weak advance. The weakness today is not unusual and at this point shows no signs that the primary direction of being up has changed. Some concern was shown by investors over the ADP payroll numbers that estimate 191,000 jobs added in March which would indicate faster employment. This Friday we get the jobs numbers for March which if better than expected may hint that the Federal Reserve could increase either the rate of tapering or a rise in interest rates sooner than expected. This concern showed itself with a couple of negative moments on the Dow and a drop in the S&P and NASDAQ but investors still remain pushing to the upside in the end. Let’s take a look at today’s action..
Market Direction S&P Intraday Chart April 2 2014
The one minute S&P chart below for today shows how the morning saw a weak open but then a quick recovery as the market direction made a series of higher lows. This led to a rally which faded in the early afternoon. The low in the afternoon though was the highest low from the morning. When that held the market pushed higher and investors jumped in pushing the S&P into another all-time high and a rather strong finish.
Advance Declines For April 2 2014
Advancing issues stayed ahead of declining issues on Wednesday but at just 55% advancing versus 41% declining you could see the weak advance through much of the day. However the real number to watch is the new highs which jumped to 208 versus 56 new lows. This is showing the figures we need to see for new highs to begin to support a move to new highs for the markets in general. The number of new highs though still needs to get up above 350 to support stronger moves up that can be held. The market direction can push higher on light numbers but any selling would push it back quickly. Instead if there is a growing number of new highs this builds momentum but also strength at the various support lines. That’s what will keep the market from falling back from new all-time highs.
Market Direction Closings For April 2 2014
The S&P closed at 1890.90 up 5.38 and closing in on 1900.. The Dow closed at 16,573.00 up 40.39 and intraday it moved to 16,588.19 as it tried to break the old Dec 31 high of 16,588.25. The NASDAQ closed at 4276.46 up just 8.42 points which again reflects a weaker advance after adding 112 points over the last two days.
The Russell 2000 ETF IWM rose $0.53 to close at $118.40 and now within striking distance of the all-time high of 120.58.
Market Direction Technical Indicators At The Close of April 2 2014
Let’s review the market direction technical indicators at the close of April 2 2014 on the S&P 500 and view the market direction outlook for April 3 2014.
There are lots of buy signals tonight after the close.
The 1750 level has been holding the S&P up since the correction ended in early February. The 1840 level is now the second line of support and 1850 is the first line of support. The retesting of the 1850 level last week and the one day of a close just below 1850 has continued to build support at 1850 making it strong enough to hold up against a downturn for probably 2 or 3 days. A new level of support is now in the market. The 1870 level is building support for the market direction which is excellent as this is the first level to be built near the upper range of the Market Direction trading range established in March. Meanwhile the 200 day exponential moving average (EMA)has moved well beyond the 1750 level. Within a couple more days the 1750 level will become longer-term support and no longer be the primary support level holding this market up. That will move to 1775. All of this points to further advances ahead for the month.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past four months, replacing MACD as the most accurate indicator. On March 28 Momentum turned positive but today it began to show signs of strength as it pushed rapidly higher. This is what the market direction up needs to see to not just push higher but also hold the market up against any declines. When the market pulls back, and it will, the strength of momentum is what will continue to work toward keeping any pullback from becoming ore than just a dip. Stronger momentum will work toward keeping the trend higher intact.
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 Feb 13. Today MACD issued a buy signal on the S&P.
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 now positive and climbing rapidly.
Rate Of Change is set for a 21 period. The rate of change is positive today but it now trending sideways. It is supporting the rally, but it is also advising that not a lot of new capital is being brought to the market.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling that the market direction is up. It is now overbought.
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 signaling that for Thursday the market direction will be higher. The Fast Stochastic is extremely overbought.
Market Direction Outlook And Strategy for April 3 2014
So far the market direction is following exactly what the technical indicators are predicting. Let’s hope the technical indicators remain accurate. For Thursday the technical indicators are now all positive. MACD issued a buy signal today which must be confirmed with a stronger buy signal tomorrow. The Fast Stochastic turned down slightly today but is continuing to point to a higher market for tomorrow. The Rate Of Change is warning that not a lot of new capital is being placed in the market at this time but for the moment it is positive. Perhaps the most important reading today came from momentum where the reading is moving higher. As explained above, that is what the market direction up needs to see.
Aside from these signals Thursday we get the Weekly Initial Unemployment Insurance Claims and again if the number is better the market direction up could hesitate as investors worry about whether this will be yet another reason for the Fed to taper quicker and of course there is that other question of interest rate hikes.
Aside from the better employment number today though, most indicators are showing mild growth. Whether that will change is hard to judge since this has to be one of the longest recoveries from a recession since the 1930’s. How quickly interest rates could rise is anyone’s guess but I would think the Fed would be worried about cutting off growth through any increase so it may take it quite slow when it comes to raising rates. Friday we get the unemployment figures for March. Both of these numbers could slow the advance further for Thursday.
For April 3 the market direction looks like the trend is still up and with all the technical indicators pointing to a higher market we could see still higher prices for Thursday although after 4 decent days the market could drift sideways on Thursday a bit more than usual. Still though having even 8 up days in a row is certainly not unheard of. The market direction up is still not overbought which means there is still room to the upside.
Remember that what is important here is that with so many buy signals in place, dips are opportunities and until that changes, even if the market drifts a bit with a bias up, that will be more than enough to continue to add profits to portfolios. It now becomes a matter of watching for when the buy signals begin to erode. That will be the first sign of an interim top or stalling of the uptrend. So after today’s weak advance, tomorrow may continue to prove weak but most indications at present are that even tomorrow could see further advances. About the only other thing to be aware of is that the number of bulls far outweighs the bears and it is rare when the majority are right but for now this push higher must be annoying the bears who have waited for any kind of serious pull back since 2012. Don’t worry, I still think they may see one this Spring or Summer but not now.
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