The market direction outlook for Tuesday was for some weakness in the morning but for stocks to still close up, even if modestly. The US Commerce department returned investors to their nervous state with news that retail sales overall rose just 0.1 percent in April, down from 1.5 percent in March. Auto sales increased in April by 0.6 percent and clothing sales were up 1.2 percent. However these gains were wiped out by declines in restaurant outings, furniture, electronics and somewhat of a surprise – online shopping.
Investors were also disheartened by news that China which boosted the markets on Monday, now seemed to be indicating that a slower economic pace would become the norm for the foreseeable future. In short, the heady days of the past have slowed to the point where even heavy stimulus cannot revive such growth in the near future. This hit gold which closed down another dollar and still below $1300 US at $1294.80.
Market Direction S&P Intraday Chart May 13 2014
The 1 minute chart for Tuesday shows a typical day for the S&P following a big up day. This year has marked a repeating occurrence where rallies one day fail to translate to follow-through on the next. Today was typical. Yesterday was a big rally and today no real follow through. Once the S&P broke the 1900 level in the early morning the market sold-off and turned sideways right into the close at $1897.45.
Advance Declines For May 13 2014
The advance decline ratio once again showed a lack of conviction. This is why I have labeled the market a trader’s market rather than an investor’s market place. Big up days have no follow-through. Volumes are poor and investors in general fear being caught in a downturn and keep fresh capital out of the market place content to pick stocks and trade back and forth with limited capital.
Advancing issues were just 43% today while decliners edged advances out with 54% of stocks declining today. New highs though came in at 162, three times higher than new lows at 66.
Market Direction Closings For May 13 2014
The S&P closed at 1897.45 up 0.80. The Dow closed at 16,715.44 up 19.97. The NASDAQ closed at 4130.17 down 13.69
The Russell 2000 ETF, IWM, gave back $1.10 today, dropping to $111.43
Market Direction Technical Indicators At The Close of May 13 2014
Let’s review the market direction technical indicators at the close of May 13 2014 on the S&P 500 and view the market direction outlook for May 14 2014.
The 1750 level continues to hold the S&P up since the correction ended in early February. Levels above 1800 have regained support with two levels now in play. The first is back at 1840 where once again there is enough strength at that level to hold stocks probably for 2 to 3 days of selling. The next level is at 1870 which is lighter support but probably enough for the S&P to break through 1900 which occurred intraday today before investors sold the S&P back down.
Meanwhile I am still expecting that at some point in the spring to summer period stocks will correct down to the 1750 level or close to that level. 1750 would mark a decline of 7.8% which is well within the confines of a normal market correction.
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 is still positive and turning sideways.
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. Today that signal continued to increase as MACD turned 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 continuing positive and is now hitting overbought readings.
Rate Of Change is set for a 21 period. The rate of change is still positive.
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 now 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 also signaling market direction is up and iis now extremely overbought
Market Direction Outlook And Strategy for May 14 2014
The market direction technical indicators are all positive and all are climbing or signaling higher prices are ahead for stocks. While the markets in general did not manage much gains, they also did not sell lower. Even the NASDAQ which closed down did so by just 13.69.
The market direction higher is still intact but investors are so nervous that they are failing to keep pushing stocks higher. Instead they trade quickly, pull a small profit out of the market and sit contentedly on the sidelines waiting for the next opportunity to develop. This works well with my Put Selling strategy as I know there is enough strength that the chance of assignment remains low even without investors placing fresh capital into trades to move stocks higher.
For Wednesday the outlook is still to the upside for stocks. This means continuing to look for Put Selling opportunities and taking them when I see them.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)