The outlook for Thursday was for stocks to try to rebound from a what is technically an extremely oversold condition. The Federal Reserve having removed doubt regarding the continuation of the tapering plan, investors focused back on earnings and revenue. A mixed bag continues to be presented to investors and they are reacting accordingly. Apple disappointed to the downside and today VISA and Facebook surprised to the upside. Meanwhile after hours Amazon disappointed and the stock fell and Google brought in a big 17% jump in revenue but missed on earnings and saw their stock jump 4%. Overall though to date about 60% of companies have failed to meet either revenue or earnings estimates which has unnerved many investors. Let’s take a look at today’s action.
Market Direction S&P 500 Daily Chart
The 1 minute chart for today’s action is below. The morning saw a quick jump and then within half an hour the market put in a low at 1784.03. That instilled some life into stocks and investors pushed them higher around 1:00 PM. The high of 1798.77 was close enough to 1800 that sellers came in and pushed the market lower. By shortly after 2:00 PM though stocks had not fallen dramatically lower and investors seemed content to trade the rest of the day with a slight bias to the upside. Stocks never recovered the 1798 level into the close but it was still a decent advance for the day.
Advance Declines For Jan 30 2014
Today saw a rise in new highs but new lows continue to dominate with 113 new lows against 80 new highs. 74% of stock were advancing though while 23% were declining.
Market Direction Closings For Jan 30 2014
The S&P closed at 1794.19 up 19.99. The Dow closed at 15,848.61 up 109.82. The NASDAQ closed at 4123.13 up 71.69 to lead stocks higher.
Meanwhile the IWM ETF rose 1.49% to close at $113.00 reclaiming everything that was lost on Wednesday.
Market Direction Technical Indicators At The Close of Jan 30 2014
Let’s review the market direction technical indicators at the close of Jan 30 2014 on the S&P 500 and view the market direction outlook for Jan 31 2014.
The most important support line in the S&P 500 is at 1750. That support line is holding the market direction up at present and that has not changed. The other support levels that were higher have all been broken and the stocks are still holding above the 100 day exponential moving average (EMA). While we are obviously in a correction mode, it’s good to see stocks holding the 100 day moving average. Technically though a bounce was expected so the move back higher today is not a surprise.
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 remains strongly negative.
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. MACD refused to turn positive since Jan 8. MACD remains negative today.
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 oversold and quite negative.
Rate Of Change is set for a 21 period. The rate of change is still negative and is moving sideways.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling that the market direction is now back to up and it is oversold.
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 indicating that the market will move higher on Friday and it is oversold.
Market Direction Outlook And Strategy for Jan 31 2014
Some of the Ultra Short position was sold today but I am still holding the remaining shares. Technically a bounce was expected for today as stocks were so heavily oversold. The technical indicators are all quite negative but there are signs of a possible second up day on Friday. The two stochastic indicators are signaling market direction up and momentum while quite negative has turned back up. Meanwhile the Rate Of Change is negative but trending sideways.
All totaled, all indicators are negative but many have begun to turn up. Technically though this is not surprising after so much selling. The currency issues facing emerging markets could become a significant problem as the US Dollar continues to remain strong. I remember after the crash of 2008 to 2009 how analysts everywhere were incredibly bearish on the dollar and felt it would be worthless within a few years. Instead the dollar has come on stronger surprising many critics.
My own trades are continuing but again I am just taking small positions and I have a lot of cash available. I see no reason to be impatient at present as the market is attempting to decide whether it will go up, down or sideways. My bet is on down but we could see another day’s bounce and then a down day on Monday.
Overall then my outlook for Friday is for stocks to moves sideways but with a bias lower.
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