The market direction outlook for Thursday was for stocks to continue to advance. I was not expecting much of an advance but seeing a positive close was important. All year the big up days have never been confirmed by follow through days. Instead big up days are followed either by little advances or by slight pull backs, none of which are bullish for stocks to continue to rise. One of the more interesting earnings releases today was Best buy. The embattled electronic retailer announced its quarterly earnings rose to $461 million or $1.31 a share. For the same quarter last year Best Buy had reported a loss of $81 million. Overall total revenue fell 3 percent but at $9.04 billion, earnings were still better than expected.
Weekly Initial Unemployment Insurance Claims
Thursday marks another week of unemployment insurance data and many analysts were surprised to see the number rise after such a good number last week. This week the Weekly Initial Unemployment Insurance Claims climbed to 326,000 an increase of 28,000. Still though the number of claims is well within my target for the market timing system and I would not expect any kind of market sell-off with numbers this good.
Market Direction S&P Intraday Chart May 22 2014
In my afternoon comments today I mentioned the market direction and how I did not believe the market would close at the highs for the day. This is indeed what happened. The S&P opened with a sharp but shallow low and then climbed to make successive higher highs throughout the day. Choppiness was a lot less today but by 3:00 PM investors still decided they wanted to take profits and they pushed the S&P back down. The S&P closed up just over 4 points.
Advance Declines For May 22 2014
New highs on Thursday continued to advance coming in at 133, while new lows fell back to 61. 62% of stocks were advancing while 34% were declining which is the exact same percentages as yesterday. Volume was still lighter today than Monday with 1.7 billion shares traded to the upside and 965 million traded to the downside. The number of stocks traded to the downside was up slightly from Wednesday.
Market Direction Closings For May 22 2014
The S&P closed at 1892/49 up 4.46. The Dow closed at 16,543.08 up 10.02. The NASDAQ closed at 4,154.34 up 22.80
The IWM Russell small cap ETF had a better day today rising $1.14 to $110.76 and back just above the 200 day EMA.
Market Direction Technical Indicators At The Close of May 22 2014
Let’s review the market direction technical indicators at the close of May 22 2014 on the S&P 500 and view the market direction outlook for May 23 2014.
There have been two key support levels in the market following the sell-off which ended in early February. They are the 1750 level and the 1775 level. If 1750 were to break, stocks would move considerably lower as a lot of investors would bail out at 1750. There are though two key higher levels that have now gained prominence. The first is 1840. In the last small pullback in mid April, 1840 was the level that held the market in check. Since then support has also been building at 1870. 1870 is important support for a move above 1900. For 1900 to be held, there must be a support base. 1870 is that base and 1840 is the second base which 1870 has built upon. The bounce back in stocks today continues to show further support for 1870.
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 back positive and climbing.
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 weak sell signal on May 15. Today MACD is continuing to point to further weakness but the sell signal is weakening further and could turn positive if Friday ends up being an up day.
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 overbought.
Rate Of Change is set for a 21 period. The rate of change remains slightly positive today but certainly does not indicate that investors are placing new capital to work.
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.
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.
Market Direction Outlook And Strategy for May 23 2014
Friday is the last day before the long Memorial holiday weekend. Historically this is a strong day for stocks. On top of the historical statistics are the technical indicators which are 5 to 1 positive and advancing.
The market direction is up for Friday. I am expecting a better close than today’s somewhat flat performance. I see little that warns this market is about to implode. Overall the biggest concern remains with the Russell 2000 as expressed in my article earlier tonight. For tomorrow I will be searching for additional Put Selling opportunities.
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