The market direction outlook for Monday Dec 30 was for stocks to remain weak, especially in the morning but push for a positive close. The S&P came close as it closed down just 33 cents and was positive a couple of times during the day. The DOW though managed to close positive for the day. The NASDAQ had a slight loss and the IWM ETF closed down just 7 cents. All the indexes are sitting at or near their most recent highs as the market prepares for the final day of what has been an impressive year. Let’s look at today’s action.
Market Direction S&P 500 Intraday For Dec 30 2013
For the second last day of the year, the market opened with a slight pop hitting a morning high of 1842.47. Within a couple of minutes selling started and the market direction turn down pushing quickly through 1840 to a low of 1838.77. Both the morning high and the morning low ultimately ended up being the high and low for the day. The morning low was bought into by investors who pushed the market back above 1840 to 1841.48. The afternoon saw the market direction move lower and then push back up to just above 1841.50. This brought out sellers who are still trying to reposition themselves for the start of 2014 and close out trades for this tax year. The market fell lower but still closed down just 33 cents from Friday’s close. All in all, a sideways day.
Year-End Positioning
It’s pretty common at this time of year to see some final year-end selling as investors take advantage of the strong market to sell some winning stocks and losing stocks to end the 2013 tax year. This positioning might last one more day but we will have to look at the technical indicators to see what they are seeing for Tuesday, the final day of 2013.
Advance Declines For Dec 30 2013
The year-end planning is having an impact on stocks as today 50% of stocks declined and 47% advanced, but the better stats to reflect on is only 186 new highs and 86 new lows. While the bulls remain in charge you can see that the sideways motion as investors reposition for taxes and for the new year is having a noticeable impact on the number of new highs and new lows.
Market Direction Closings For Dec 30 2013
The S&P closed at 1841.07 down just 0.33. The Dow closed at 16,504.29 up 25.88. The NASDAQ closed at 4154.20 down 2.40.
The IWM ETF closed at 115.09 down 7 cents to match the loss from Friday.
All the market direction closings for Friday are bullish. None of the indexes are giving back the recent gains made which considering there is not a lot of support at present levels, is a good sign that the market direction will be moving higher soon.
Market Direction Technical Indicators At The Close of Dec 30 2013
Let’s review the market direction technical indicators at the close of Dec 30 2013 on the S&P 500 and view the market direction outlook for Dec 31 2013.
The most important support line in the S&P 500 is still at 1750. That support line is holding the market direction up at present and that has not changed. The second support level of 1780 is very light support followed by another band of light support at 1800. The 50 day simple moving average (SMA) is widening as it moves away from the 100 day exponential moving average (EMA). This is showing investors that the push higher is strong and being bought heavily into by investors. It is rare when the 50 day SMA pulls much further away from the 100 day without a few days of rest where the moving averages become closer again. We could therefore see some more sideways action in the market direction on Tuesday. Then if the market pushes higher to start 2014, the 100 day will also move higher closer the gap between it and the 50 day.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past two months, replacing MACD as the most accurate indicator. Momentum is positive and unchanged from 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 Dec 23. That buy signal was strong and has been confirmed. Today MACD remained almost unchanged from Friday.
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 overbought for the seventh trading day.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the seventh day and continues to show strength.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is now signaling the market direction is down although the two indicators readings (%K and %D) are close enough that they reflect more a neutral stance in an overbought market, than either up or down. We would call this sideways with a bias down. The Slow Stochastic is extremely 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 signals for Monday were sideways with the bias to the downside. That signal has changed with more downside than neutral for Tuesday. The Fast Stochastic is also extremely overbought.
Market Direction Outlook And Strategy for Dec 31 2013
Most of the market direction technical indicators are reflecting the ongoing sideways motion as investors reposition their portfolios. The fact that most of the indicators still have considerably strength, such as MACD, ROC, Ultimate Oscillator and Momentum are warning that once the repositioning ends we could see the market push higher at the start of the new year.
For Tuesday the two stochastic indicators are both showing signs of weakness. The Fast Stochastic is indicating that more selling will dominate Tuesday, the final day. None of the indicators are reflecting a big jump in valuations tomorrow.
There is not much more to be said as we enter the final trading day of 2013. It has been a spectacular year with not serious corrections or even a medium correction to contend with. It rarely gets better than this for investing, especially when selling puts as the principal investment method. There are a lot of predictions that 2014 will not see these kinds of gains and that could be the case.
Europe Again
We could see more problems out of Europe in 2014 as the economies remain sluggish with high unemployment and a mountains of debt. The ECB could try to print more Euros which may work for a time but I won’t be surprised to see Europe as a stumbling block for stocks in 2014.
China in 2014
An article in the financial news today discussed the growing debt problems of China’s local governments which have amassed more than 3 trillion dollars of debt. This is an increase of 62 percent since 2010. It represents 52% of the country’s entire GDP and while nowhere near as bad as most European countries and certainly North American countries, it is troublesome and could see an impact on a number of Chinese stocks and other stocks such as Caterpillar Stock which I wrote about this past weekend.
Caterpillar Stock (CAT)
Today’s chart of Caterpillar Stock shows that the Slow Stochastic issued a sell signal on Friday and momentum is declining. The stock has pushed away from the Upper Bollinger Band but today while it did move lower intraday, it managed to close unchanged from yesterday. Again this could just be some year-end tax selling especially with such a big move higher for the stock in December. I know I sold my shares on Friday so the sideways movement may be nothing more than just tax selling. Momentum although falling is still very strong with a reading of 105.55.
Still though the chart below looks like the stock wants to pull back at least to $87.50 to look for some support. My strategies for the stock are in the article from this weekend.
Caterpillar Stock for Dec 30 2013
Summation
For tomorrow then I am expecting little change to the market direction for the final day of the year. I still think there could be another attempt at a positive close. Once New Year’s Day is over I am expecting a jump in the market direction.
Happy New Year
I will have another chance to wish investors a very Happy New Year, but with tomorrow being New Year’s Eve I thought I would get an early start and wish everyone a Happy New Year.
My best wishes for another profitable year in 2014, but truly the best profit in the world cannot compare to health, happiness and the joy that our loved ones, family and friends bring to us every day. Enjoy the final trading day of 2013.
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