The market direction outlook for Monday was once again for weakness in the morning and then a push to close slightly higher. Instead stocks stayed weak all day and only the NASDAQ managed to squeak out a positive close. The SPX and the Dow both closed down slightly.
Market Direction S&P Intraday Chart June 23 2014
Monday’s one minute intraday chart below shows the choppy action which investors saw today. The morning saw investors try to push to the 1964 level only to fail. This brought in selling which managed to break the 1960 level in the late morning. A lunch hour rally failed but then around 2:00 PM stocks began to climb higher. The last hour saw stocks try to push back to the morning highs but fail. Overall it was a strong sideways day with investors stuck trading stocks that are overbought and many that are overvalued. It was a very tight range for trading on Monday.
Advance Declines For June 23 2014
New highs on Monday were still above 200 with 234 stocks making new 52 week highs and just 15 making new lows. Advancing issues made up 47% of the volume with 49% of stocks declining. Volume was very low for stock with a total of just 2.7 billion shares traded..
Market Direction Closings For June 23 2014
The S&P closed at 1962.61 down just 0.26. The Dow closed at 16,937.26 down 9.82. The NASDAQ closed at 4368.68 up just 0.64.
The Russell 2000 IWM ETF closed down just 23 cents to $118.02
Market Direction Technical Indicators At The Close of June 23 2014
Let’s review the market direction technical indicators at the close of June 23 2014 on the S&P 500 and view the market direction outlook for June 24 2014.
Stock Chart Comments: There are no changes to the chart comments. There is a new light support level at 1930. This is very weak support but based on technical readings, there is some reason to expect light support at that level. Stocks traded hands regularly there for several days and each time the S&P dipped back to 1930, investors were busy buying. While a correction at this point would definitely wipe out 1930, it would still delay a pull-back.
Aside from 1930 the support levels are 1919 – which again is light support, 1870 which is strong support, 1840 also strong support. Those two support levels, 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 1820 at present.
I have repeatedly mentioned two other support levels, namely 1775 and 1750. Both are critical support levels. 1775 is important but 1750 is now the bottom line. A break of that would mark a severe correction of 10.5% 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 an anticipating as there are no signs of any impending correction.
My Pull-Back Outlook: I have been waiting for a pull-back this summer to between 1870 to 1919 and so far there have been very few signs to support my outlook but the summer is only beginning.. However the VIX Index closed at 10.85 and never in its history has the market made a top when the VIX Index was low. Shortly we will get second quarter earnings. If earnings are strong and beat estimates we may not see a pull-back until perhaps late summer.
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 and moving slightly lower.
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 buy signal on June 18. This buy signal is still in effect but remains weak which is indicative of the overbought nature of this market at present.
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 continuing positive and is again overbought.
Rate of Change: 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.
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 for the fifth day and it is now extremely overbought.
Market Direction Outlook And Strategy for June 24 2014
For Tuesday the technical indicators are still all pointing up and only MACD is weak. The overbought nature of the market could result in a slight dip but overall the chance of any kind of serious pullback at this point is still slim. Investors are still unwilling to sell shares here and believe that stocks are still heading higher..
For Tuesday, the market direction still looks set to try to advance further. Again there could be weakness, but overall the outlook is for stocks to attempt to keep climbing. This type of market is best described as sideways with a bias up. Again watch for weakness in the morning and then an attempt to push higher into the close..
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