My Market Direction outlook for Friday had been for some shallow selling, an attempt to rally in the afternoon and then selling into the close. I was close, except for the selling into the close. Instead the market direction opened with a push higher and then sold off into the noon hour. From there the market direction continued to push back and by 3:45 PM, the S&P market direction had almost reached the early morning high. Then in the last 15 minutes the market direction pushed higher and gave the S&P 500 another record closing.
Market Direction Action For May 10 2013
So what happened on Friday to push the markets higher in the last 15 minutes? I think a number of factors weighed on investors.
During the day precious metals continued to decline despite the Japanese government increasing their currency printing. The US Dollar broke through 100 YEN and the Nikkei closed at its highest level since January 2008 on the belief that corporate earnings are going to surprise to the upside thanks to a devalued Yen. The G7 Finance Ministers seem unconcerned about the increasing in currency printing as many countries are copying the Bernanke formula for dealing with tepid growth. Germany’s stock index hit an all time high on Friday.
South Korea saw its market plunge 1.8 percent over worry that the rapidly dropping Yen will make Korean exports more expensive.
Market Direction Testing Of Support
The last 15 minutes boost of stocks could have been caused by the lack of selling in the morning. Looking at the S&P 500 stock chart for Friday you can see that the high for the day was put in by 10 AM. This was followed by two periods of selling but both were shallow which is what I had expected in the Thursday market direction outlook. The low was held easily by investors. The rise in the afternoon saw no selling pressure. The last 15 minutes saw investors jump back in and pick up enough shares to push the market to break the 10:00 AM morning high. This is a typical bull chart for market direction.
S&P 500 market direction 5 minute chart for May 10 2013
Market Direction Economic News For The Week
The S&P 500 moved higher by over 1% by Friday May 10. This week though there are some economic reports that could impact the market direction more than last week.
- Monday we get the latest retail sales.
- Wednesday we get producer prices and industrial production.
- Thursday is consumer prices and housing starts
- Friday is leading indicators.
These economic numbers will have a lot more impact that the handful of numbers from last week. Any numbers that disappoint in a major way could bring sellers into the market since the market direction up is very overbought.
Market Direction Closing For May 10 2013
The S&P 500 closed at 1,633.70 up 7.03 points. The Dow closed at 15,118.49 up 35.87 points. The NASDAQ closed at 3,436.58 up 27.41 points despite Apple Stock selling lower.
Market Direction Technical Indicators At The Close of May 10 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 10 2013 on the S&P 500 and view the market direction outlook for May 13 2013.
For Momentum I am using the 10 period. Momentum is positive and is pushing higher but it is still lower than earlier in the week. While perhaps nothing to be concerned about, the fact that momentum is churning away more sideways than up indicates that there is buying on dips and selling on rises but commitment from investors to actually buy and hold stocks here is slim.
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 26 and the signal remains valid. The signal reading though is lower today than on the past two days indicating the move is still up but the market direction is so heavily overbought that a pull back could occur at any time.
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 extremely overbought and is still signaling that a change in market direction to down is needed for the overbought condition to be worked out before stocks can move meaningfully higher.
Rate Of Change is set for a 21 period. Rate Of Change is still positive but while it is back up today it is still not as high as it was earlier in the week, once more signaling a lack of conviction from investors.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and is signaling that the market direction is down. Since the Slow Stochastic looks out longer than a single day we could see some selling early to mid-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 is also extremely overbought but it indicates that the market direction will be higher on Monday although not by much as both readings are very close which would indicate a more neutral market than simply “up”.
Market Direction Outlook And Strategy for May 13 2013
This week has a lot of economic numbers for investors to wade through. Any show of weakness and the market direction could pull back. A pull back would be healthy here as the market direction can keep pushing higher but it will lack strength from investors which means that any push higher will be easily given back in any kind of weakness.
My Market Direction Technical Analysis can only look out for one to three days. Longer term I cannot predict what the market direction may do although I cannot believe that countries around the world can just keep printing paper money and think it will not eventually end badly. Countries everywhere want to devalue their currencies to bolster their trade with other nations. Basically they want a “currency edge” over their neighbors.
In this environment risk versus reward always has to be taken into account. I always have about 30% of my entire portfolio in cash, but of my capital tied to stocks only about 75% is in actual use as I keep looking for opportunities here and there to apply more. This week is options expiration for May 18 and I have a lot of naked puts that will expire. This will release more capital for Put Selling trades. I still see nothing on the short-term horizon that tells me the market direction will correct “big”. Therefore I am continuing to look for opportunities and trade those opportunities.
Right now though, the Market Direction Technical Analysis consensus is that the market direction is very overbought and due for a rest. Whether that will happen is tough to say although there are warnings signs from momentum which is failing to increase but is trending sideways not up higher. MACD while still very positive cannot climb to new heights either. Rate of Change is following suit as it climbs but fails to set higher readings than earlier last week. Slow Stochastic is signaling a market direction shift to down and the Fast Stochastic while positive is actually signaling neutral rather than up for market direction. The view then has to be that while the trend remains up for market direction a breather will happen sometime this week.
Monday Market Direction Outlook
Monday looks set to open strong and then turn weak. If the economic numbers on Monday surprise to the upside then that could be enough for market direction to claw a bit higher delaying selling until Tuesday.
Internal Market Direction Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links