The market direction for Thursday had retained a bias to the downside but the Weekly Initial Unemployment Insurance Claims came in better than expected with a drop of 20,000 for the week. This brings the Weekly Initial Unemployment Insurance Claims down to 331,000. This move lower from 350,000 once again shows the value of using the Weekly Initial Unemployment Insurance Claims as a market timing system. Every time the Weekly Initial Unemployment Insurance Claims have moved up to around the 350,000 level the market direction weakens. Below 350,000 it continues to strengthen. Meanwhile though the weekly claims did not bolster the outlook from the majority of analysts on CNBC this morning who still are looking for a poor jobs report on Friday and renewed selling in the markets.
Market Direction S&P Possible Short-term Buy Signals
The jump in the market direction this morning though is enough that intraday the charts are starting to improve. For this week the latest poll put a full 45% of investors and analysts on the bearish side and only 20% on the bullish side. The contrarian view then is that stocks may have put in a bottom here, at least for the short-term. The technical indicators at 1:00 PM on the S&P show that the S&P is back to just below the 100 day exponential moving average (EMA). It needs to cross up and over and then retake the 1780 level to prove that the 1750 level will hold.
Momentum is improving but still very negative and MACD is also very negative. The Ultimate Oscillator has improved and rate of change is still signaling a lot of nervousness among investors as it stays flat and negative.
It is the Slow Stochastic and Fast Stochastic that both are signaling a market direction up. This is just an intraday signal and we will know more after the market closes but it’s a good sign for at least some temporary relief from the selling.
1750 Support is Crucial
I have pointed out repeatedly how important 1750 support is to this market. It was incredibly oversold by Monday so more than a day of gains is not unprecedented and actually to be expected, but still it’s a nice sign to see that the weekly initial employment numbers were good enough to push stocks higher.
Outlook Into The Close
I don’t think there is any doubt that the market direction will remain positive today. While the majority of investors today are still trading, there is some buying going on in specific stocks that fell perhaps harder than expected such as Johnson and Johnson Stock, Clorox Stock, Coca Cola Stock, Intel Stock, AT&T Stock and many others. Overall though stocks are not overly cheap by any stretch. This is why selling put options is such a wonderful strategy. Even in the present correction I am able to pick support levels in big cap stocks and sell puts and then buy them back as the market bounces.
If the 100 day is recovered and holds, I will be closing many covered calls and waiting for stocks to recover a bit higher before looking at covered call opportunities again. For today then investors look like they are willing to hold the market direction up, in preparation for what most believe will be a decent unemployment report on Friday.