The market direction for Tuesday was wild. The market started off with a rally built on the back of the earnings from Coca Cola Stock and Johnson and Johnson stock. With the rally underway, analysts were at a loss to explain why the market direction then took a dip and literally began to fall apart. With the Dow down over 100 points and the NASDAQ well through 4000 and down 10% on the day the market turned and headed back up to close near the early morning highs. Analysts looked at all kinds of reasons for the market gyrations including the Ukrainian Crisis and rumors of fighting between pro-Russian militants and Ukrainian forces. Whatever the case it was a volatile ride. Let’s take a look at today’s action.
Market Direction S&P Intraday Chart April 15 2014
The morning saw the market direction rally higher. The earnings were decent from both Coca Cola and Johnson and Johnson and this excited investors who bought into stocks. By 9:51 the high was 1843.40 with the market direction solidly higher and the market over the 1840 resistance barrier. Then selling erupted and the market collapsed over 27 points until around 1:00 PM when the S&P hit 1816.29. What was most interesting was the number of bearish analysts who suddenly were parading in front of the cameras and media outlets. Within minutes though the bottom was in and the market began a spectacular rise to close at 1842.98 after briefly breaking through to 1844 before closing just below the morning high.
With the bearish analysts quickly gone from the media outlets, the hunt was on for why the market had made such a strong move lower and then recovered. The Ukrainian Crisis seemed to fit the bill, so it was “blamed”. Overall though this is not that uncommon an occurrence for a market that is in correction mode. Normally when a market begins to sell-off as it did in the morning, investors who had bought in begin to worry and start to sell their positions as well. This increases the selling which draws in even more investors. Big up and down intraday moves are not all that unusual for stocks.
Advance Declines For April 15 2014
Despite the steep sell-off in the morning advancing issues still held a commanding lead with 59% of stocks advancing and 37% declining. New lows though reached 110 while new highs were just 69. Still though, momentum continues to favor the bulls at this point in the advance decline ratio.
Market Direction Closings For April 15 2014
The S&P closed at 1842.98 up 12.37. The Dow closed at 16,252.56 up 89.32. The NASDAQ closed at 4034.16 up 11.47.
The Russell 2000 ETF IWM rose 43 cents to $111.15
Market Direction Technical Indicators At The Close of April 15 2014
Let’s review the market direction technical indicators at the close of April 15 2014 on the S&P 500 and view the market direction outlook for April 16 2014.
The 1750 level has been holding the S&P up since the correction ended in early February. All the levels of any support above 1800 have been broken last week. This leaves the next area of any real support to be down around 1775. The market direction fell all the way back to 1816.29 today before rallying to close above 1840. The ease with which the decline occurred shows that there is very little if any support left above 1800. It was good to see the S&P close above 1840 but it will take weeks to rebuild support at that level. Those are weeks I do not think the S&P has before the next decline.
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 negative.
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 Apr 7. The sell signal is quite strong but today began to turn back up.
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 negative and today failed to cross over into positive territory.
Rate Of Change is set for a 21 period. The rate of change is basically almost unchanged again today and continues to remain negative.
For the Slow Stochastic I use the K period of 14 and D period of 3. Today’s action was enough to move the Slow Stochastic into signaling that the market direction is now up. The Slow Stochastic is still oversold.
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 has followed the Slow Stochastic today and issued a buy signal near the close today. The Fast Stochastic is also oversold which could assist a move back up again tomorrow.
Market Direction Outlook And Strategy for April 16 2014
For Wednesday the market direction still looks capable to trying to rally once again. There was quite a lot of momentum in the afternoon today and that could be enough to continue the rally into Wednesday. I am expecting some selling in the morning but nothing as dramatic as seen today. Instead I am expecting some weakness to start and then the market direction to continue to move higher. The afternoon should be choppy but inthe end I think tomorrow the market direction will end higher than today’s close.
Overall though while tomorrow promises to be higher, the underlying trend is still lower for stocks. The drop today in the NASDAQ does not bode well for the next little while. However a lot of the more speculative stocks have been badly beaten up. One stock I want to mention this evening is Gilead Sciences Stock.
Gilead Sciences Stock (GILD)
A huge number of the biotech stocks have been hammered over the past couple of weeks and Gilead Sciences Stock is one of those. GILD stock is a bit pricey still as it trades near 36 times price to earnings and 30 times price to cash flow but the stock has real value. This is a company that has a profit margin of 27% and revenue of $11.5 billion. While GILD Stock is a speculative trade, unlike many other specs stocks, this one actually has products and revenue growth.
The chart below shows that since the selling started the interest in the stock is continuing to rise. Prior to the stock moving into highly overvalued prices this year, the stock was trading between $50 to $60. That trading pattern is well suited for this stock. Should it fall back in that area it is worth keeping on the watch list.
Gilead Sciences Inc Stock 12 months to Apr 15 2014
Option premiums on GILD Stock are very high which makes selling put options int he above range, easy and actually quite profitable. I only have one speculative stock I trade in at one time. For a while it has been Facebook Stock however Gild stock also holds a lot of merit and I may switch back and forth between Facebook Stock and Gilead Sciences Stock this year.For example the April 25 2014 expiry $60 put strike is trading for as high as .43 near the close today. That is 0.71% for two weeks. If this can be repeated, the return is 18% annually. Those put premiums though can jump around a lot because the stock is quite volatile. Today for example the $60 put strike traded as high as 58 cents when the stock pulled back. That means watching GILD stock for intraday dips and sell the put options within the above mentioned trading range no more than two weeks out.
Gild stock put options for Apr 25 14 expiry
Market Direction Outlook For April 16 2014
In closing just to repeat again that the market direction overall is down at present. However for Wednesday I am expecting the rally that got underway this afternoon, to continue for at least much of the day tomorrow.
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