The market direction outlook for Thursday was for stocks to try to squeeze a bit more out of the present rally. It was a fairly choppy day but the range on all the indexes was fairly tight heading into the long weekend. Few investors wanted to push the markets much higher but still very few wanted to sell, sensing that perhaps this week the rally will continue. This week is pivotal for stocks, especially tech stocks with the NASDAQ down 5% still and Microsoft, Apple, Facebook and Amazon all reporting latest quarterly results. The other big stock that will release its results is Netflix. Let’s start off with a look at Thursday’s market action on the S&P.
Market Direction S&P Intraday Chart April 17 2014
The one minute chart below for April 17 2014 shows Thursday’s choppy session. The market in the early going pulled back making a low of 1856.72 easily falling below 1860. Then a rally back saw an early morning high.
11:00 AM Trade
This is beginning to result in a continuing pattern which I have been trading consistently with the Trading For Pennies Strategy. I will be writing more about this in the week ahead. However just to update, almost every day around 11:00 AM the market has put in either a morning top or bottom and the market has turned up or down at that time. Most of the events have been down, but this has made the Trading for Pennies strategy highly profitable. I will start updating the trades shortly in the 2014 portfolio. This is something for those investors who use the Trading For Pennies strategy to watch for.
Following the 11:00 AM sell-off into the lunch hour an intraday dip was held and investors bought back into the market in the late lunch hour pushing the index back to almost the 1870 level before selling it into the close. The close of 1864.85 was up just slightly on the day but set the market up for further gains in the upcoming week.
Advance Declines For April 17 2014
Stocks continued to advance on Thursday with advancing issues narrowly beating out decliners with 56% of stocks advancing and 41% declining. However the number of new highs is starting to pick up steam again with 141 new highs and just 69 new lows.
Market Direction Closings For April 17 2014
The S&P closed at 1864.845 up 2.54. The Dow closed at 16,408.54 down 16.31. The NASDAQ closed at 4095.52 up 9.29.
The Russell 2000 ETF IWM rose $0.56 to close at $112.92
Market Direction Technical Indicators At The Close of April 17 2014
Let’s review the market direction technical indicators at the close of April 17 2014 on the S&P 500 and view the market direction outlook for April 21 2014.
The 1750 level continues to hold the S&P up since the correction ended in early February. All the levels of any support above 1800 have been broken and will need time to heal and create support again. Any downturn in stocks will quickly see these levels above 1800 break. On Thursday the S&P closed above 1860 for the second day but still support is poor at best. Only the 1840 level has any support worth mentioning and after the sell-off, that support is limited at best..
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 but moved higher on Thursday.
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 still strong but again on Thursday the readings are improving although still negative.
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 rising.
Rate Of Change is set for a 21 period. The rate of change is turned negative on Thursday but is more neutral than 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 no longer oversold but continues to show an uptrend for the start of the week.
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 continues to follow the Slow Stochastic and issued another strong up signal for Monday at the close on Thursday.
Market Direction Outlook And Strategy for April 21 2014
The outlook continues to be on the bullish side for stocks on Monday. Momentum was poor on Thursday but the sideways action going into the long weekend was not unexpected. The outlook for Monday though is still mixed although the two stochastic indicators are decidedly quite bullish. Meanwhile momentum and MACD refuse to turn positive despite the rally back from the sell-off. The rate of change is still showing that there remains little conviction among investors to dump in new capital. Instead trades are the common element at present as investors buy and sell for small daily gains. The ultimate oscillator is positive and rising rapidly now and another couple of days of buying and it will signal oversold. If it signals oversold while the momentum and MACD indicators are still negative, it will not be a positive for stocks to continue to climb.
Outlook Is Cautiously Bullish
The market direction outlook for Monday is cautiously bullish for stocks to continue to advance higher but trading will remain choppy. Investors need to see more capital flow in, less IPOs and more conviction among investors for higher prices. The cautious stance of investors is holding the market back from making new highs. With May just two weeks away, it is difficult to tell if the S&P can push to new all-time highs and hold there going into May and the worst six months of the year. Remember the adage “Sell in May and go away” has a lot of statistical data to back up that claim.
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