The market direction on Wednesday was for the markets to remain weak after the big jump on Tuesday but still close positive. While analysts were busy talking about the ADP numbers and how this was holding the market back on Wednesday, it wasn’t the ADP numbers that kept stocks under wraps. It was nervousness over Thursday. This is a half day with the market closing at 1:00 PM for the Independence Day holiday and the employment numbers for June will also be released along with the Weekly Initial Unemployment Insurance Claims. All three events weighed heavily on investors today..
Market Direction S&P Intraday Chart July 2 2014
The one minute intraday chart for July 2 shows just how tight the trading was. The morning saw all the action to the upside. Just as before, the 10:00 to 11:00 period was ideal for more Trading For Pennies Strategy trades. I did a full analysis of yesterday’s (July 1) penny trade which returned 28%. You can review that trade here. As the afternoon progressed the trading became tighter and choppier into the close. However while there was selling, there was little selling pressure with investors holding stocks above 1973.
Advance Declines For July 2 2014
The sideways action today cut down the number of new highs. Only 172 new highs were made today while there were just 8 new lows. 60% of issues were declining and 36% were advancing. Volume was lower once again today with just 2.8 billion shares traded as investors get an early start on the long weekend. I wouldn’t read much into the numbers today as it was pretty well a wait and see day as investors prepared for Thursday’s employment numbers..
Market Direction Closings For July 2 2014
The S&P closed at 1974.62 up 1.30. The Dow closed at 16,976.24 up 20.17. The NASDAQ closed at 4457.73 down 0.92.
The Russell 2000 IWM ETF closed down 46 cents at $119.10 after making a new all-time intraday high yesterday.
Market Direction Technical Indicators At The Close of July 2 2014
Let’s review the market direction technical indicators at the close of July 2 2014 on the S&P 500 and view the market direction outlook for July 3 2014.
Stock Chart Comments: Stocks traded sideways today staying above the 1973 valuation. Support continues to build at 1956. Each day that stocks close back above 1956 is slowly building light support. This may not last and it certainly won’t hold the market up at the present time but it is encouraging for more upside action.
Support levels at present are 1930 and 1919 which are light support. 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 move lower. A break below 1840 at present would challenge the 200 day EMA however at the rate the market is moving higher the 1840 and 1870 will soon be below the 200 day EMA which is sitting around 1825 at present.
I have repeatedly mentioned two other support levels, namely 1775 and 1750. As the market continues to push higher, these are now critical support levels. 1775 is important but 1750 is now the bottom line. A break of 1750 would mark a severe correction of 11% at present 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 only pullback we may experience is from the overbought condition the market is once more in, or a shock in the next quarterly revenue numbers which will start unofficially on July 8 with Alcoa reporting its revenue.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator over the past eight months, replacing MACD as the most accurate indicator. Momentum is positive.
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 a sell signal on June 24. That sell signal is now almost gone as MACD is preparing to turn back positive.
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 still overbought.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change remains positive and is now moving sideways.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is up and it is extremely 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 is signaling that the market direction is up and it is also extremely overbought.
Market Direction Outlook And Strategy for July 3 2014
Tomorrow is a short day as investors head into the Independence Day long weekend. Unfortunately, at the same time, the employment numbers are to be released along with the Weekly Initial Unemployment Insurance Claims. Both are expected to be strong numbers but they have in the past been game changers so investors are nervous.
Technically though the indicators are all positive except MACD and even it is ready to turn positive. Technically then, any selling will be another opportunity to look for trades.
For tomorrow stocks are set to move higher, but a lot depends on the employment numbers which investors get before the markets open. I am expecting another sideways day tomorrow with a mixed close depending on the employment report.
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