The market direction outlook for Wednesday was a split. The technical indicators were split in favor of the market bounce on Tuesday being just a bounce and nothing more. My own outlook was for stocks to push higher which is what happened. So for the first time in a while my own observations were correct, besting the technical indicators outlook. To be fair, 2 of the technical indicators were pointing to a higher market for Wednesday.
Part of the reason for the continued push higher was no talk of tapering by any Fed official on Wednesday. That certainly helped as did US producer prices posting their largest gain in six months in December as the cost of gasoline rebounded. Inflation though was still benign. That added to the news that the manufacturing gauge for New York state jumped to its highest reading in 20 months. On top of this the US Labor Department said the seasonally adjusted producer price index rose 0.4 percent last month the biggest jump since June. To add more weight to the good news the New York Empire State general business conditions index jumped to 12.51 the highest reading this January since May 2012.
Bank of America Stock
Bank of America which is the second-largest US bank, announced profits of almost $3 billion as revenue jumped and mortgage losses declined. While the stock has a long way to go to recover to the levels of $50.00 from 2007, it was nice to see the stock jump 2.27% to close at $17.15 the highest level since May 2010.
Good News Just Keeps Rolling In
Don’t you find it funny how days with bad news have strings of bad news reports and days with good news have, well, strings of good news pouring in. The World Bank raised its forecast for global growth for the first time in 3 years and predicted better growth for 2015 and 2016.
On top of the World Bank news came data that German consumption rose 0.9 percent in 2013 while analysts had expected no growth at all.
GM Stock – Back To The Dividend
GM announced the reinstatement of its dividend which will work out to about 3% at closing prices of $39.38, down .64 cents of 1.6% as perhaps not as many shareholders are interested in the dividend as GM thought.
Market Direction S&P 500 Intraday For Jan 15 2014
Below is the 15 minute chart for today and Tuesday. You can see that on Tuesday the rally pushed the market to close just below 1840 but for most of the day the market was climbing. Today you can see that once the market made it over 1840, it tried to push higher but turned sideways as it came up against resistance at the all-time high. We could see some weakness tomorrow at the start as investors try to gauge whether the S&P can break through. Any weakness and I will be selling puts. I believe the market will push beyond the 1850 level.
Advance Declines For Jan 15 2014
Advancing issues once more outpaced decliners. 63% of stock advanced while 33% declined. This is just a small change from yesterday when 68% advanced and 29% declined. Meanwhile the new highs were back up with 256 new highs versus 78 new lows..
Market Direction Closings For Jan 15 2014
The S&P closed at 1848.38 up 9.50 after making a new all-time intraday high earlier in the day. The Dow closed at 16,481.94 up 108.08 and recovering all the recent decline of almost 200 points earlier in the week. The NASDAQ closed at 4214.88 up 31.87 and is back leading the indexes higher.
The IWM ETF closed at $116.20 up 86 cents and breaking to a new all-time high.
Market Direction Technical Indicators At The Close of Jan 15 2014
Let’s review the market direction technical indicators at the close of Jan 15 2014 on the S&P 500 and view the market direction outlook for Jan 16 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. There is a growing band of support developing for the market at the 1825 level. It is not as strong as resistance at 1840 but there are more investors picking up stocks each time the S&P has trouble around the 1825 level. With the market now above 1840, it has to hold here and push higher to build support at 1840.
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 moved back up today but not in a big way. Instead it ended the day neutral on the market.
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 Jan 8 2014 which was confirmed on Jan 9. The market push higher today has moved the MACD reading up but it remains negative.
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 still positive today.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 18th day and has turned higher.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling that 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 is also pointing to the market direction to be up and it signaling an overbought condition.
Market Direction Outlook And Strategy for Jan 16 2014
Any dip in the market tomorrow and I will be adding to my Put Selling trades. While not all the Market Direction Technical Indicators are in agreement, the majority are pointing to a higher market. There is not a lot else to say. I see no reason to change my strategies. I am continuing Put Selling and hope volatility can continue and keep option premiums elevated.
For Thursday there may be some weakness during the day but that weakness will be an opportunity in my opinion. I am expecting the markets to push higher again on Thursday but I think the big moves higher will be replaced by smaller grinding moves up for now.
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