The market direction outlook for Friday was for stocks to move lower. With the Weekly Initial Unemployment Insurance Claims on Thursday coming in at 319,000 I would not expect a big drop. But weakness on Friday was definitely in the outlook. Indeed for much of the morning stocks swung up and down. This made the Trading For Pennies Strategy profitable for the morning. The see-saw day lasted until the last hour when stocks staged a bit of a comeback and managed to close up on all the indexes. The Dow closed within easy reach of setting a new all-time high. Meanwhile consumer prices rose 1.8 percent in April down from 2.4 percent in March but still showing no signs of deflation. While stocks were weak, many analysts warned on Friday that the situation in the Ukraine remains troubling and could quickly escalate. A number of financial analysts are warning that investors are unprepared for an escalation of the crisis and such talk did seem to weigh on some investors on Friday.
Market Direction S&P Intraday Chart May 9 2014
The 1 minute chart for Friday shows the action for stocks. I did two Trading For Pennies Strategy trades. The first was within a few minutes as I had indicated on Thursday that I would be trading to the downside. I also did two market direction trades which I will have to post as well. Both made only slight profits. A second penny trade which I entered at 11:00 AM was based on watching the 1868 level. By 11:00 AM that level had been tested twice and the third test just after 11:00 AM held the same level and began to climb back up. I bought in and held for a nice return moving higher. I did not penny trade or market direction trade in the afternoon. At 1:00 the market had just broken through 1878 when it pulled back for almost an hour. The pull back though only last to the 1872 valuation. That had been around the morning high. The pull back failed to break below 1872 and that seem to bring in some buyers who pushed the market up slightly to close positive near the highs for the day at 1878.48. The market movement on Friday in the S&P would seem to point to higher prices this week.
Advance Declines For May 9 2014
Advancing issues were 54% on Friday and decliners made up 42%. But new highs fell to just 85 while new lows reached 105. These numbers are anemic and point to an ongoing sideways action for stocks.
Market Direction Closings For May 9 2014
The S&P closed at 1878.48 up 2.85. The Dow closed at 16,583.34 up 32.37. The NASDAQ closed at 4071.87 up 20.37.
The Russell 2000 ETF, IWM, rose $1.00 to close at $110.03 for the best gain among the indexes for the day.
Market Direction Technical Indicators At The Close of May 9 2014
Let’s review the market direction technical indicators at the close of May 9 2014 on the S&P 500 and view the market direction outlook for May 12 2014.
The 1750 level continues to hold the S&P up since the correction ended in early February. All the levels of any support above 1800 have been broken and will need time to heal and create support again. Any downturn in stocks will quickly see these levels above 1800 break. The only level above 1800 that has any support worth mentioning is the 1840 level. That level of support is building as the S&P stays above the 1840 level. While it may appear there is resistance to new highs at the present time, there really is not a lot of resistance. Instead there is just limited conviction among investors who remain wary of paying more for stocks as many investors consider stocks fully valued. I am still expecting that at some point in the spring to summer period stocks will correct down to the 1750 level. The market continues to hold above the 50 period simple moving average (SMA) and does look like is wants to try to break to new highs.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past four months, replacing MACD as the most accurate indicator. Momentum on Friday moved back to positive and is rising.
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 April 22. Friday’s readings fell to the point that MACD is more neutral than up or down. It could be on the verge of a sell signal although if stocks move up on Monday, it will most likely move back higher.
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 rose on Friday after tumbling on Thursday.
Rate Of Change is set for a 21 period. The rate of change is still positive and it back climbing indicating some buying was occurring on Friday.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is back to up for the start of the week.
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 had been signaling up for Thursday and then changed to down for Friday. For Monday it is signaling up and overbought. Overall though neither the Slow Stochastic or Fast Stochastic have strong signals to up or down in the market direction. Instead both continue to be weak.
Market Direction Outlook And Strategy for May 12 2014
The market direction technical indicators are closer to up than down. All are positive and many are rising. If you look at the stock chart you can see that in general while the trend is sideways, there is a slight bias building to the upside for stocks. That upside is weak but it is there nonetheless. Any kind of catalyst to the downside could stop the rise and the Ukrainian crisis if it escalates could pull the markets lower. Overall though stocks look like they are sitting sideways with a bias to the upside.
For Monday I will be trading with a bias to the upside.
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