The market direction outlook for Thursday was for stocks to rally at the open and then hit some selling before moving higher late in morning or lunch hour. I then expected a choppy session with a slightly positive close. Overall that is what we saw. The morning pop was higher than I expected but a lot of that was due to Apple Stock and their decision to split the stock 7 to 1. In all the years of my investing which is around 40 now, I have never seen a 7 to 1 stock split. This certainly excited investors who pushed up the stock better than 8%. Other notable earnings came from Microsoft Stock, Caterpillar Stock, Facebook Stock and Nucor Stock to mention just some of the larger heavyweights. The market was also affected by the Ukrainian crisis which might have helped keep a lid on price rises.
Weekly Initial Unemployment Insurance Claims
Lost in the day’s earnings announcement was the news that the Weekly Initial Unemployment Insurance Claims rose again for the second week. The Weekly Initial Unemployment Insurance Claims rose to 329,000 and are now above the $325,000 mark. While the labor department said that the four-week average of applications rose just 4,750 to 316,750 that number if not as important as the Weekly Initial Unemployment Insurance Claims for my market timing system. It was just two weeks ago that the Weekly Initial Unemployment Insurance Claims was at its lowest level since October 2007. This number needs to be watched as we leave April next week and enter into May.
Market Direction S&P Intraday Chart April 24 2014
The one minute chart below for April 24 2014 shows today’s choppy action. The opening pop in the S&P marked the high for the day. The market immediately sold off and went negative for a short period. From there a recovery pushed through late morning and into the lunch hour. The most important level was the morning support at 1875. That level was not broken during the rest of the day. This could assist the market direction tomorrow. From early afternoon the market then sold into the close and the S&P ended with a slight gain for the day.
Advance Declines For April 24 2014
Stocks were almost equally split again on Thursday with 49% advancing and 47% declining. New highs were 142 versus 67 new lows. The number of new highs continues to be uninspiring and while the bulls still have the momentum, these numbers do not reflect a market strong enough to set and hold new highs.
Market Direction Closings For April 24 2014
The S&P closed at 1878.61 up 3.22. The Dow closed at 16,501.65 unchanged on the day.. The NASDAQ closed at 4148.34 up 21.37 at the close but gave back much of the early gains of the day. Still though it is above the 100 day EMA which is a plus.
The Russell 2000 ETF IWM fell 29 cents to close at 113.61. The Small Cap Index is continuing to have trouble recovering let along challenging the new highs. Again, this must be watched for any additional warning signs.
Market Direction Technical Indicators At The Close of April 24 2014
Let’s review the market direction technical indicators at the close of April 24 2014 on the S&P 500 and view the market direction outlook for April 25 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. The only level above 1800 that has any support worth mentioning is the 1840 level. Today was basically a sideways day with just a small gain. There was nothing of significance for the market direction up.
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 is still positive but is falling quickly now and is about to turn 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 buy signal on April 22 and today MACD continued to move higher.
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 falling quickly as well.
Rate Of Change is set for a 21 period. The rate of change is still providing a positive reading.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling market direction up and continues to climb toward an overbought reading. The signals are becoming tighter or narrower which is often followed by a sell signal.
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 also signal another up day for Friday but the signals are also becoming tighter or narrower which is often followed by a sell signal.
Market Direction Outlook And Strategy for April 25 2014
Tomorrow I think stocks will have a tougher time than they did today. The number of new highs is poor and continues to reflect poor numbers. For a rally to gain enough strength to set new highs and hold those highs we need much stronger 52 week highs. It was nice to see Apple Stock bounce up but overall the action on the NASDAQ was not inspiring. I was stopped out for a second time on the market direction portfolio and did not re-enter. I want to see what the action is like on Friday before committing further funds.
The rally looks like it has lost traction here. The two stochastic indicators are both looking like they will change to a sell signal unless momentum can pick up to the upside. The Momentum technical indicator is clinging to positive but that will not last. The rate of change is positive but just barely so. The Ultimate Oscillator is falling quickly.
In other words, all the indicators while positive are showing signs of a rally that is ending. We could be seeing another rally that has failed to make and hold the recent highs. That will be bad overall for the market especially as we have only one week left in April. Sometimes there is self-fulfilling sentiment and a lot of investors are worried about the next 6 months. I was expecting a major correction sometime this spring. We could be seeing the ground work right now being laid for that correction.
For tomorrow then I am planning a trade in VISA which I wrote about this evening, but I am not willing to commit much more capital at this stage until I see better momentum to the upside. I believe we will see a negative day for Friday however the technical indicators have enough strength that I would predict that tomorrow is a sideways day with the bias down.
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