The outlook for Friday was for stocks to remain weak and move slightly lower. The outlook though to start the week is for stocks to move back higher. The movement on Friday continues to suggest that the direction up is solidly intact. On Friday consumer sentiment as measured by the University of Michigan came in above estimates at 82.5.
For Friday stocks stayed sideways and were weak, but in the last hour investors moved back into stocks, pushing the SPX to a positive close.
Market Direction S&P Intraday Chart June 27 2014
The one minute intraday chart for Friday June 27 shows how fairly even the day was until the late afternoon. In the morning stocks stayed sideways trending along the important 1956 valuation level. This is the level I have referred to often and which is beginning to build light support at. Shortly after the lunch hour stocks dipped slightly which was immediately bought. Investors then pushed stocks back to the 1956 level. Without any serious selling in the late afternoon, investors continued to buy, pushing the S&P to close almost at the high for the day.
Advance Declines For June 27 2014
The number of stocks making new 52 weeks highs came in back above 200 with 223 new highs. New lows came in at just 11. Volume picked up on Friday with 4.2 billion shares trading. 65% of stocks were advancing versus 32% declining.
Market Direction Closings For June 27 2014
The S&P closed at 1960.96 up 3.74. The Dow closed at 16,851.84 up 5.71. The NASDAQ closed at 4397.93 up 18.88.
The Russell 2000 IWM ETF closed up 79 cents to $118.34.
Market Direction Technical Indicators At The Close of June 27 2014
Let’s review the market direction technical indicators at the close of June 27 2014 on the S&P 500 and view the market direction outlook for June 30 2014.
Stock Chart Comments:A new support level is developing in the S&P. You can see how support is starting to build at the 1956 level. 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 the bulls to see more sideways action with a bias to the upside.
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 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 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 but again today’s buying into the close continues to point to investors unwilling to part with their shares at the present time. Investors are fairly convinced stocks will move higher and with the next earnings season about to start, investors will probably be fairly reluctant to sell this week unless a strong catalyst to the downside emerges.
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 remains active but weak.
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 positive and moving sideways.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change remains positive but slightly lower.
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 to neutral and 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 is signaling that the market direction is now up and it too is overbought.
Market Direction Outlook And Strategy for June 30 2014
For the final day of June the market looks set to continue with its move sideways and higher. Still somewhat weak, the technical indicators are 5 to 1 in favor of the market still moving higher. There are of course weak areas within the indicators which includes a neutral outlook from the Slow Stochastic at this time, but the strength of the up indicators continues to suggest stocks have further upside ahead this week.
This is a short week as Friday is independence day and often stocks move higher historically in the days leading to July 4.
July Trends
The historic trend for July is among the best for the third quarter although the NASDAQ tends to be weak in July. However the Dow has been up the first day of July in 19 of the last 24 years. In general then, July is of the 6 worst months of the year, the better month. With investors reluctant to unload shares at the present time, July could be a reasonable good month for stocks this year.
Overall then the market direction for Monday is for stocks to move sideways and keep the upward bias. I am continuing to look for opportunities and am taking positions in stocks as they appear.
New Section – Stock Market Trend
A new section has been added to the USA Members entitle The Stock Market Trend. This section is from my own trader’s journal. In this section I keep a running list of economic and technical indicators that focus on the stock market medium-term trend. Members can access this post through the menu bar beside the heading “Current Trades”. 
The medium-term trend is important in that it aids in making decisions on everything from which investing strategies to use to how much capital to commit. It also assists as a guide which I find very useful when a trade I entered is turning against me. By understand the medium-term trend I am better able to make rescue decisions or accept assignment of shares knowing that the trend up is still in my favor and that a trade that has failed may in fact still end up profitable. In simple terms, understanding the medium-term trend can at times be the best guide for deciding what to do with a trade that has failed.
This new section will be updated each time I update my own trader’s journal and I will post a notice of an update to the market direction outlook.
For Monday- Sideways Bias Up
For Monday then the stock market direction is sideways with the bias up.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)