The market direction outlook for Monday was for stocks to continue their advance even if just marginally. The Apple Stock split helped move the markets higher just with the enthusiasm of investors. Volume was huge on Apple Stock. Added to that was the Family Dollar Stores stock purchased by corporate raider Carl Icahn. Finally the news that Merck would spend nearly $4 billion for Idenix Pharmaceuticals paying three times more than Friday’s closing price. All of this helped buoy investor confidence which lead to more buying. Overall volume came in at 2.8 billion which was not as high as a number of days last week, but considering the summer often sees lower volume days, perhaps volume was reasonable.
Market Direction S&P Intraday Chart June 9 2014
The intraday chart for June 9 shows a bit of a different day from the past several days. The morning saw a choppy advance. The 11:00 AM trade appeared for those doing the Trading For Pennies Strategy. It ended around the noon hour with the S&P at an all-time intraday high of 1,955.55. From there investors sold the market lower until by 2:30 the S&P was down to 1,947.16. That brought in dip buyers who pushed the market direction higher to close back near the early morning high of 1951.27.
Advance Declines For June 9 2014
New highs came in at 299 which remains decent for further advances. New lows were just 6. Once again as on Friday, the market is starting to show better breadth as momentum continues to shift stronger to the upside. This is leading to the extreme overbought signals we have been seeing in the technical indicators. 59% of all stocks were rising and 37% declining. Total volume was 2.8 billion shares which is average for the past several days. What we want to watch now is the number of new highs. They need to continue to stay above 250 to reflect strong buying pressure.
Market Direction Closings For June 9 2014
The S&P closed at 1951.27 up 1.83. The Dow closed at 16,943.10 up 18.82. The NASDAQ closed at 4336.24 up 14.84.
The Russell 2000 tacked on another $1.02 to close at $116.90. Intraday the Russell reached $117.48 before pulling back. With the all-time high at $120.58, the Russell, like the NASDAQ has made a decent recovery which is helping propel the S&P and Dow higher.
Market Direction Technical Indicators At The Close of June 9 2014
Let’s review the market direction technical indicators at the close of June 9 2014 on the S&P 500 and view the market direction outlook for June 10 2014.
Once again there is nothing new to mention in the support levels. With the market continuing to break into new all-time highs, there are now four key support levels in the market. Long-term support is at 1750. If that level should break at this point, it would mean a significant correction would ensue. The second level of support is at 1775 which again is good support and if it broke would mean that the market direction would quickly collapse down to 1750. These two indicators are good values to use for longer-term trading. As long as stocks stay above these levels, there is no concern the markets will experience any kind of severe pullback. The 1775 and 1750 levels are both now below the 200 day exponential moving average (EMA).
The next two levels are at 1840 and 1870. At this point with the S&P above 1900, any pull back to 1870 would be a signal to pick up short instruments like the SDOW or SQQQ ETFs or spy put options. If 1870 were breached it would mean a further break lower to at least the 1840 level and for investors it would be a quick and easy trade to pick up short products to enjoy some profits down to 1840. If 1840 were to break at this point it would mean to roll any at the money puts lower and roll down covered calls but only if 1840 were to break. Between 1840 and 1775 there is very little to no support.
At present I am still expecting a pull-back to look for support around the 1897 level, however if you look at the chart above you can see that the S&P may be trying to create a support level around 1919. At present however there is no support at 1919 or anywhere above 1870. The market is now up 79 points above major support. At some point it will move lower to set up another support level. I believe that support level could end up being somewhere between 1897 and 1919.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past five months, replacing MACD as the most accurate indicator. Momentum is positive and strong.
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 May 23. The MACD signal continues to point to higher valuations in the S&P although the signal is only marginally higher today..
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 continuing positive and remains extremely overbought.
Rate Of Change is set for a 21 period. The rate of change remains positive and continued moving higher which indicates more fresh capital is coming into the market. This is typical when the S&P breaks out as it has done over the past four days.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is neutral to down and it is extremely overbought. The move to down is the first indication of a down bias since May 19.
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 down and it too is extremely overbought.
Market Direction Outlook And Strategy for June 10 2014
Back on June 2 I wrote in my intraday comments that I felt the market direction rally beyond 1924 had a 90 percent chance of failing on the first attempt. Studying the market direction technical indicators I see nothing that has changed that. The market direction up is heavily overbought as the breakout in the S&P and Dow into new all time highs has brought in a lot of investor enthusiasm.
With the jobs numbers behind us and the ECB rate decision finished, the market will need further catalysts to move higher. The three catalysts mentioned at the start of tonight’s market direction outlook worked well on Monday. I am not sure how much staying power they have for Tuesday.
The market direction technical indicators are 4 to 2 that stocks will continue their advance. I am continuing to trade but staying far enough out to assist in the event that stocks pull back somewhat. I am not expecting a major correction. There are no signals that a major correction is about to occur. Instead I am looking for the market direction to pull back to consolidate recent gains and prepare to push higher.
The problem is we may not see much of a pull back beyond 1919 on the S&P as investors are enthused over stocks and will most likely continue to buy the dips which is what keeps the market direction up.
Since May 20th, there have been 13 trading days. Of those days only two were down and both were marginal pull backs only. I see no reason not to continue to trade carefully as I do believe there is a pullback coming but not a correction. Therefore by keeping some cash and margin available investors can take advantage of any pullback while at the same time continue to apply some available capital to further trades.
For Tuesday the market direction appears to be sideways again with a mixed outlook. We could finally see a rest as the two stochastic indicators are signaling, or we could continue to move up marginally.
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