The market direction outlook for Wednesday was for stocks to start weak and then push to a higher close. While both the S&P and the NASDAQ followed this outlook, the Dow was held back, particularly by Boeing Stock, Caterpillar stock and United Technologies Stock. Meanwhile Apple stock rose dramatically on their latest earnings and revenue and volume picked up substantially as the stock appears ready to break to $100.00.
The Ukrainian crisis remains on the minds of investors as two Ukrainian fighter jets were downed today by pro-Russian rebels. Investors hope that the Ukrainian crisis will not escalate and pull stocks back yet again. Let’s take a look at today’s action and outlook for Thursday July 24.
Market Direction S&P Intraday Chart July 23 2014
The one minute intraday chart below shows a slightly choppy session for Wednesday. The morning in particular was choppier than the afternoon. The morning saw the market open and quickly fall lower to 1982.r44. From there a rally took the market to the day’s high at 1989.23 marking another new all-time high. The S&P is within easy distance of 2000. The rest of the morning the market tried repeatedly to break through 1989 but failing this, the market direction turned back down during the lunch hour but held the 1985 level. This brought in some afternoon buying and the S&P market direction moved back up to close marginally higher at 1987.01.
Advance Declines For July 23 2014
Volume was equal to Tuesday’s volume with 2.9 billion shares traded. Up volume was 50% and down volume 46%. Advancing issues made up 56% of the volume. Meanwhile there were 174 new highs, a rise from yesterday’s 156 and there were 26 new lows, up slightly from Tuesday’s 17. Investors continue to stay invested in the market and seem convinced stocks still have further to rise.
Market Direction Closings For July 23 2014
The S&P closed at 1987.01 up 3.48. The Dow closed at 17,086.63 down 26.91. The NASDAQ closed at 4473.70 up 17.68 due in large part to Apple Stock.
The Russell 2000 IWM ETF closed up just 13 cents at $114.86.
Market Direction Technical Indicators At The Close of July 23 2014
Let’s review the market direction technical indicators at the close of July 23 2014 on the S&P 500 and view the market direction outlook for July 24 2014.
Stock Chart Comments: I have been commenting for several days regarding the past chart patterns of the various dips in the S&P over the past 3 months. I have marked these in the chart above as A, B and C. The period marked D is where stocks are at present. You can see that all the patterns are basically the same for the dips, except the present one marked D. While as of Wednesday the pattern is starting to reshape back to what was previously seen in A, B and C, there are still signs that the market direction higher is under pressure which was not there in the previous rallies. This continues to be the area I am watching for any signals that the market direction may turn back down.
1956 Support Level was tested on Thursday last week and held the market up again setting up the 1956 as a significant support level for the present rally. A close back below 1956 would make the present rally suspect and advise to trade to the downside. 1956 is NOT a significant support level for the bull market in general but it is for the market being able to continue higher into August.
Support levels at present are 1956 which is medium support and pivotal to the market direction continuing higher. 1930 and 1919 are both light support and would most likely just delay a strong pullback by a day at most. 1870 and 1840 are strong support. 1870 and 1840 at present mark important trading levels for investors. Both are now below the 100 day exponential moving average (EMA) so any pullback this summer which breaks 1870 should be used as a signal to commence picking up ultra short ETFs or spy put options 2 months out for a bigger move lower. A break below 1840 at present would challenge the 200 day EMA.
I have repeatedly mentioned two other support levels, namely 1775 and 1750. As the market continues to push higher, these are now absolutely critical support levels. 1775 is important but 1750 is now the bottom line. A break of 1750 would mark a severe correction of 230 points which is below a 10% correction which would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating as there are no signs of any impending correction of that magnitude.
My Pullback Outlook: I have been waiting for a pull-back this summer to between 1870 to 1919. The break in the chart pattern I mentioned above (Points A, B, C, and D) is beginning to show signs of returning to previous patterns which would be bullish for stocks and bearish for my pullback outlook.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum turned positive on Tuesday and continued positive today..
MACD Histogram: 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 sell signal on July 8 and the sell signal is still active today although it slowly continues to weaken. Interestingly, the sell signal does weaken but it has been days now of the MACD signal only weakening slightly each day. It is still negative into the third week of trading..
Ultimate Oscillator: 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 moving sideways.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change is still positive and starting to rise.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day, it has stayed positive for stocks again today. It is overbought.
Fast Stochastic: 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 at the close is also signaling that stocks are headed higher and it too is overbought.
Market Direction Outlook And Strategy for July 24 2014
Today’s movement higher had decent volume but certainly nowhere near 4 billion shares. The lighter volume makes it easier for stocks to move up and down. At present the technical indicators are 5 to 1 in favor of the market direction continuing higher. The market volume today though was just 50% up volume which shows that there are many investors busy taking profits as the market moves higher.
For Thursday investors receive the Weekly Initial Unemployment Insurance Claims before the markets open. While rarely a game changer, the numbers may continue to show employment growth which may stall the market advance for Thursday as investors worry about the Fed raising interest rates sooner rather than later.
But the technical indicators are primarily bullish and with 11 points left before the S&P reaches 2000, my outlook for Thursday is for a weak start but then more sideways action than up or down, but a slightly bias to the upside at the close.
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