The market direction outlook for Thursday was for a tight trading range and weakness ahead of the employment numbers on Friday. Those numbers are what could the next catalyst for the market direction to continue higher. Whether they can be a catalyst for a move lower I have a lot of doubt. Even strong employment numbers might turn the market lower for part of Friday morning or perhaps even the day but by next week the market direction will be back up. All investors know that rising interest rates are a possibility but they also know it will be many months or even a few years before interest rates will rise high enough to disturb stocks. This is part of the reason why I kept my market direction portfolio invested today and am preparing it for higher valuations in the market direction. But today it was all about waiting for tomorrow’s numbers.
Market Direction S&P Intraday Chart April 3 2014
Below is today’s market direction chart for the S&P set at 1 minute. You can see that from the outset the market began to create a pattern of lower highs. Around 11:00 AM selling intensified until into the lunch hour at which time investors pushed stocks higher but failed to reach the 11:00 AM high. That resulted in a lot more selling and the low point for the day. By 2:30 the S&P was down to 1882.65. Selling slowed and the market direction turned back up and pushed all the way to the 11:00 AM high into the close. The 11:00 AM period has been marking significant high and low periods since February. Markets tend to develop patterns which can become, for a while, excellent trading points. Today’s 11:00 AM sell-off for example was used for an excellent Spy Put Options Trade. 
Advance Declines For April 3 2014
Declining issues took the upper hand today for the first time in several days. 57% of stocks declined while 39% advanced. But once again new highs far outstripped new lows with 174 new highs and only 61 new lows. The bulls are definitely in favor here. Investors still need to see better numbers for new highs but the number of new highs is still encouraging.
Market Direction Closings For April 3 2014
The S&P closed at 1888.77 down 2.13. The Dow closed at 16,572.55 down just 0.45. The NASDAQ closed at 4237.74 down 38.72.
The Russell 2000 ETF IWM fell far more than I would have expected today with a drop of $1.20 which marked a full 1% closing at $117.20. It was the weakest of all the indexes.
Market Direction Technical Indicators At The Close of April 3 2014
Let’s review the market direction technical indicators at the close of April 3 2014 on the S&P 500 and view the market direction outlook for April 4 2014.
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 1850 is now strong enough to probably support the present advance for 3 days before breaking. The highest support level is now at 1870. It is light support but still it should be able to withstand a couple of days of selling before breaking.
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. Momentum continues to remain positive although today it pulled 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) issued a sell signal on Feb 13. On April 2 the MACD issued a buy signal on the S&P. Today’s rise in MACD confirms the signal from yesterday.
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 failed to fall with today’s selling which is a good sign for the market moving higher in coming days.
Rate Of Change is set for a 21 period. The rate of change is positive today but it turned down slightly indicating some of the nervousness we saw today in the market direction especially around 2:30 when the market collapsed to a new lower low before recovering.
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 Friday the market direction will be higher. The Fast Stochastic is extremely overbought.
Market Direction Outlook And Strategy for April 4 2014
Tomorrow is all about the employment numbers for March. Meanwhile the technical indicators continue to point to more gains for the S&P in coming days. This is why I believe even if the employment numbers see stocks sell-off on Friday is will be just a trading opportunity as the market direction up will quickly recover and continue to move higher. The technical indicators are pointing to strength building once again in stocks. Hopefully stronger readings will be seen in the days ahead as the market needs better numbers for a solid and sustainable move higher.
Today’s market direction was not surprising at all. Not only is the market dealing with a growing overbought condition but investors always worry about the employment numbers and its impact on stocks and their direction. What was impressive was the recovery late in the day which saw the indexes erase most of their losses.
For tomorrow I am expecting reasonably good employment numbers based on the past few weeks of the Weekly Initial Unemployment Insurance Claims. Nothing earth shattering by any stretch. I think the numbers will show a continual plodding along in the economy and for most investors, that’s what is preferred as plodding numbers will keep the Fed on edge over when to raise interest rates. There is no change to my strategy despite the market direction sitting at all-time highs. The indicators are clear in advising that the market direction is up and I should be continuing to look for investment opportunities which is exactly what I am doing.
Today was an exceptional day for a variety of Put Selling trades. Tomorrow morning could be as well depending on how investors perceive the employment numbers. I would review your watch list this evening. Find those that are set to perform well based on their direction at present. Then watch for opportunities tomorrow morning.
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