The market direction outlook for Thursday was mixed. There was a good chance for a bounce and a good chance for more weakness. We got both but the bounce unfortunately was back from the weakness. Still the S&P squeaked out a small gain while the Dow ended slightly lower as did the NASDAQ. There is growing concern among investors and analysts as the market is thrashing back and forth here. I watched Jim Cramer this evening. Two days ago on Jan 7 as the Dow roared back up he was very bullish. He pointed out the advance was broad and reached almost all the sectors which was good for stocks. Today though he was very concerned. Friday’s non-farm employment numbers should be a catalyst one way or the other. I have stayed careful taking on only small positions and waiting for the numbers on Friday.
Alcoa’s Earnings
There was some part of the Alcoa’s earnings that showed some growth in the aluminum sector and therefore the economy but overall the numbers I felt showed weakness. With revenue of $5.59 billion, they beat estimates of $5.36 billion but even with paying the $384 million in total fines, they still earned too little. The problem is the price for aluminum is low squeezing profits. The stock is the best performer in the S&P over the past quarter but I think it is overvalued a great deal consider the earnings and future earnings growth. After hours there was heavy selling. Tomorrow should be interesting for the stock. I do not trade in Alcoa, but it is still interesting to watch it.Other Disappointments- Retail Stocks
There were other disappointments as well including Family Dollar Stores and Bed Bath and Beyond, American Eagle Outfitters, L Brands, and Pier 1 Imports, Of these I trade only in Family Dollar Stores which bounced back by the end of the day following an astounding plunge which provided excellent Put Selling opportunities although in the end the bigger money was made in buy the stock itself for a bounce back up.
Costco meanwhile turned in a good performance as did Macey’s on news they were slashing employees from their workforce.
Market Direction S&P 500 Intraday For Jan 9 2014
The market opened up and then sold off. The first jump though, pushed the market beyond 1840 breaking through what has been resistance for a number of days. The second rally managed to squeeze by 1840 only to plunge to a third little rally. That third morning rally ended up being the closing high for the day and once again closing the S&P below 1840. Meanwhile by 11;00 AM we saw another morning low. this is typical of the market, making a low in the morning and spending the rest of the day trying to climb back out of the morning low.
By the close of the day the market had spent most of the day clawing its way back from the 11:00 AM sell-off to close just slightly ahead of where it had opened.
Advance Declines For Jan 9 2014
The market continues to show that it wants to move higher. The market again today was opposite to yesterday as stocks see-saw back and forth day after day. Today advancing issues were 51% while decliners were 46%. But new highs rose to 213 while new lows also rose to 86. Again there are more bullish signals from the advance decline ratio than bearish.
Market Direction Closings For Jan 9 2014
The S&P closed at 1838.19 up just 0.64. The Dow closed at 16,444.76 down 17.98. The NASDAQ closed at 4156.19 down 9.42.
The IWM ETF closed at 114.89 up just 3 cents.
Market Direction Technical Indicators At The Close of Jan 9 2014
Let’s review the market direction technical indicators at the close of Jan 9 2014 on the S&P 500 and view the market direction outlook for Jan 10 2014.
The most important support line in the S&P 500 is still at 1750. That support line is holding the market direction up at present and that has not changed. The second support level of 1780 is light support followed by third band of even lighter support at 1800. The market direction today broke through 1840 for a very short period but then failed to hold 1840 and closed just below it again.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past two months, replacing MACD as the most accurate indicator. Momentum is positive but lower today.
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 Dec 23. That buy signal was strong and has been confirmed. MACD pulled back again today and confirmed yesterday’s sell signal. MACD is now indicating that stocks are going to move lower.
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 back to positive as it continued the see-saw back and forth scenario that is plaguing the market direction.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 14th day and has turned sideways again.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling the 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 was again pointing to up for what is now the third day.
Market Direction Outlook And Strategy for Jan 10 2014
I indicated in my market direction outlook yesterday that the growing pattern over the past week is exhibiting all the signs of a market that wants to move higher but is about to move lower. If the numbers tomorrow come in and surprise investors, stocks could sell-off heavily. Again, with the Weekly Initial Unemployment Insurance Claims around 330,000 I would not expect any kind of collapse or plunge, but heavy selling would happen, I believe, if the numbers surprise. The same holds true if they surprise to the downside and continue to show weakness. I don’t think that is likely to happen. There are too many signs that the economy is improving. The employment numbers may surprise to the upside tomorrow.
Meanwhile the market direction technical indicators are again mixed. The stochastic indicators are both pointing to higher prices and the Ultimate Oscillator is higher and positive today. MACD has issued a sell signal but Rate of Change is trending sideways and stil refuses to turn negative. Momentum meanwhile is still clinging to positive readings but it won’t take much to turn those readings negative.
It really matters little what the technical indicators are predicting for tomorrow. It all comes down to the non-farm payroll numbers.
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