Market Direction Outlook For June 18 2014 – Sideways Waiting For The Fed

The market direction outlook for Tuesday was for stocks to trend sideways with a slight lower bias ahead of the Fed comments on Wednesday. The morning saw stocks slightly in the red but the afternoon saw them trend higher. In the end though, stocks closed higher while investors wait for the Fed comments.

Market Direction S&P Intraday Chart June 17 2014

The intraday 1 minute chart for June 17 shows today’s action. There was slight weakness to start but within a few minutes buying commenced and pushed the S&P to above 1941 before selling dropped it back. The pullback lasted until shortly after 11:00 AM. Investors noted that the second pullback was nowhere near as low as the first and they commenced to buy. A decent afternoon rally took the S&P to a close of 1941.99, once again moving higher.

Market Direction intraday June 17 2014

Advance Declines For June 17 2014

Volume on Tuesday matched Monday’s 2.9 billion. There were 136 new highs and just 7 new lows. 67% of volume was to the upside and 31% to the downside.

Market Direction Closings For June 17 2014

The S&P closed at 1941.99 up 4.21. The Dow closed at 16,808.49 up 27.48. The NASDAQ closed at 4337.23 up 16.13.

The Russell 2000 IWM ETF was up 82 cents or 0.71% to close at $116.97.

Market Direction Technical Indicators At The Close of June 17 2014

Let’s review the market direction technical indicators at the close of June 17 2014 on the S&P 500 and view the market direction outlook for June 18 2014.

Market Direction Technical Analysis June 17 2014

I keep mentioning the same 4 key support levels night after night, but it is important to understand how to invest based on those support levels. So I will keep the same information in this section until there is a change. 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.

My outlook for a pull-back is unchanged. I still expect to see the market test to find support at some point over the summer months and with no support in place except at 1870, I believe the market may try to build support at 1919 or between 1919 and 1870. Unless the market can break through 1870 I see no reason to curtail my trading activity.

The action over the past four days is suggesting that a support base may be attempted at the 1930 to 1935 level. It is too early to predict whether this will succeed or even what valuation is the more probable, but there are signs investors are unwilling to sell stocks much lower at present. Should the Iraq situation improve and oil and gold pull back from recent highs, we could see the market direction mount another challenge to the all-time highs. At the same time further escalation of Iraq fighting or involvement by the US military will probably be negative for stocks.

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 but has declined significantly over the past several days. Still though it is trending sideways which is bullish.

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 16. The MACD signal was negative and confirmed Monday’s sell signals. While the signal is still a weak one, it is nonetheless a sell signal on the market direction.

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 but  is no longer overbought.

Rate Of Change is set for a 21 period. The rate of change remains positive and is still supporting the recent break out of the S&P above 1900. The readings continue to stay strong for the rate of change indicating investors are buying stocks with fresh capital.

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. It is no longer overbought.

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 for Wednesday and it remains overbought.

Market Direction Outlook And Strategy for June 18 2014

There is not much to say this evening as the market direction is basically on hold waiting for the Fed comments on Wednesday. My strategies have not changed and neither has my outlook. At present the market direction remains up. Unless the Fed says something that catches investors unaware, stocks on Wednesday should continue the anemic advance. We should keep an eye on MACD to be sure that it does not keep signaling market direction down.

For Wednesday I am expecting a sideways market direction until after the Fed comments. At that point I am expecting stocks will move higher.

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