Thursday’s outlook for the market direction was “For Thursday stocks look set to rally in the morning but then could turn negative or certainly sideways. If that happens it will confirm that Wednesday was just a bounce and nothing more.”
So what should we make of today’s market direction movements? The Dow ended slightly negative, the NASDAQ slightly positive and the SPX up 1.76 points to close below 2000 but above 1994.
Weekly Initial Unemployment Insurance Claims
For the second week the Weekly Initial Unemployment Insurance Claims rose to what is now a two month high. The climb placed today’s numbers at 315,000 although the labor department indicated they felt last weeks numbers were hard to judge due to the Labor Day holiday. Nonetheless the numbers are up which could hint at more people back looking for work from the non-participating long-term unemployed although the number of people accepting unemployment benefits also rose by 9,000 to 2.49 million in the week ended August 30.
SPX Market Direction Intraday 1 Minute Chart
The opening on Thursday saw stocks fall through 1994 and 1990. This seemed to set up weakness for much of the morning. A rally back around 10:00 AM failed to recover the 1994 level. This once again brought in more selling. The market direction shifted to down and the 1990 level easily broke again. The selling dried up though at 1986 which was higher than the low on Wednesday. From there buyers stepped back in and bought from 11:00 AM through to the lunch hour and reclaimed 1990 and by 12:30 had recovered 1994. After lunch though the market drifted and fell back to 1990. Two tests of 1990 in the early afternoon held the market at 1990 which seemed to embolden more investors and they once more captured 1994. The remaining hour the market drifted sideways again but this time up at the 1994 level. From there it moved higher into the close and closed at the high for the day.
SPX intraday Sept 11 2014
Advance Declines For Sept 11 2014
Volume picked up again slightly today with 2.94 billion shares traded. This time though 64% of volume was to the upside. New highs and new lows ran neck and neck during the day. By the end of the day there were just 42 new highs and 40 new lows but the SPX managed to hold the 1994 level which continues to favor the bulls.
Market Direction Closings For Sept 11 2014
The S&P closed at 1997.45 up 1.76. The Dow closed at 17,049.00 down 19.71. The NASDAQ closed at 4591.81 up 5.28.
The Russell 2000 IWM ETF moved higher again today up 75 cents to 0.65% to 116.61.
Market Direction Technical Indicators At The Close of Sept 11 2014
Let’s review the market direction technical indicators at the close of Sept 11 2014 on the S&P 500 and view the market direction outlook for Sept 12 2014.
Market Direction Technical Analysis for Sept 11 2014
Stock Chart Comments: Today’s main event was the S&P falling in the morning to 1986 but failing to break the Middle Bollinger Band. From there the market basically moved back higher and is now above the Middle Bollinger Band moving along it. You can see that the Bollinger Bands are starting to come together for a Bollinger Bands Squeeze. Based on the performance over the past several days of the market direction, the early guess is that the Bollinger Bands Squeeze will see the market move higher and break into new all-time highs again.
1994 Level: 1994 was tested repeatedly today but still has not broken decisively. The 1990 level was easily broken through today and just as easily recovered.
1975, 1956 Support: Both are light support and both may be tested in coming days. 1975 is the more significant valuation at this point.
1930 Support: Light support is found at 1930.
Strong Support Levels are at 1870 and 1840 (no longer shown). At present I am not expecting any break of either of these levels.
The other two support levels not shown in the chart above are 1775 and 1750. I have explained that these two are critical support for the present bull market. While 1775 is important it is 1750 that is now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This 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.
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator, replacing MACD as the most accurate indicator. Momentum is negative but very close to turning 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 Sept 10 but it remains unconfirmed today.
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 positive and rising today.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change stayed positive and moved sideways meaning we could see more positive moves tomorrow for stocks.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is lower. It is no longer 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 still signaling down and it is no longer overbought. The signal though is close to issuing a buy signal which we could see tomorrow.
Market Direction Outlook And Strategy for Sept 12 2014
Today’s move back higher was not supported technically. The move appears to be more fundamental than technical. At the close today, there are two sell signals, one unconfirmed and very weak sell signal, 1 sell signal that is ready to turn positive and two positive signals including a good jump in the Ultimate Oscillator.
Overall the market still is technically showing signs of weakness but the buying picked up again today which shows just how many investors believe this is a buying opportunity.
Range Bound
In general though what we are seeing is range bound stocks. With the SPX stuck trading between 1990 and 1994 this smacks more of consolidation than the start of a sell-off. Neither 1994 or 1990 have been decisively broken. Both valuations have been repeated tested and every time the market appears ready to move lower, buyers are back pushing the index higher and recapturing those two valuations. This is typical of consolidation and certainly not a sell-off.
Staying Invested
In general then, my strategy is definitely unchanged. I am continuing to invest my capital as I do not see any signals that the 1994 and 1990 levels are above to be broken through decisively which would signal a larger move to the downside.
I will have up a number of trade ideas shortly for both the US and Canadian markets to end the week as I see no signals that concern me at this moment. That does not mean to throw caution to the wind, but it does appear at this time that even if 1990 were to break, a move down to 1975 would be little more than another opportunity for additional trades as the bull market at the present time is healthy and well.
For Friday I am expecting the pattern of weakness and then a rally back to continue but I am not expecting any decisive move lower. Sideways with a mixed outlook remains the main bias at present. Mixed means stocks have as much of chance to move lower as they do to move higher but despite the mixed outlook for Friday, the SPX is preparing to retake the 2000 valuation again.
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