The market direction outlook for Monday Jan 6 was for the market direction to remain mixed. The bias from the technical indicators was lower. Overall stocks had a tough time of it although at one point I thought the market direction was going to move higher. It was mistake on my part and I was stopped out of my position during the day. Let’s take a look at today’s market direction action.
Market Direction S&P 500 Intraday For Jan 6 2014
The market opened higher and immediately began selling. A short rally did not last and the market fell much harder putting in a low in the late morning. The rally in the afternoon failed to reach even the morning rally high which disappointed investors who then sold the market off into the close. The close saw the market just above the morning lows.
Advance Declines For Jan 6 2014
Declining issues outpaced advancers but not by a wide margin. 53% of stocks declined while 45% advanced. There were though 138 new highs and just 76 new lows.
Market Direction Closings For Jan 6 2014
The S&P closed at 1826.77 down 4.60. The Dow closed at 16,425.10 down 44.89. The NASDAQ closed at 4113.68 down 18.23.
The IWM ETF closed at 113.76 down 93 cents or 0.81% making it the worst decline of all the four indexes.
Market Direction Technical Indicators At The Close of Jan 6 2014
Let’s review the market direction technical indicators at the close of Jan 6 2014 on the S&P 500 and view the market direction outlook for Jan 7 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 very light support followed by third band of light support at 1800. The market direction is continuing its decline and while not very large yet the S&P 500 does look like it may try to pull back to the 50 day simple moving average (SMA) which is right around 1800, which is light support.
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 took a second big drop on Friday. Today though the action of the market still kept momentum sideways and not moving lower.
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 and is just clinging to remain positive.
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 continuing to fall lower into negative readings.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 11th day and is moving sideways. It has not turned negative but continues to show that investors are picking up stocks randomly.
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 down.
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 signaling market direction down for Tuesday.
Market Direction Outlook And Strategy for Jan 7 2014
The market direction technical indicators are continuing to show that stocks will remain weak on Tuesday but they also show that there is the possibility of some upside still left, even if just slightly. Momentum refuses to turn negative, MACD is hanging on to a small positive reading and the rate of change is going sideways and refusing to fall. The advancing issues while lower than the declining issues continue to show higher 52 week highs than the declining issues. Under all the weakness then there remains strength.
I thought the market direction was going to turn up this morning and stepped in and bought shares in the market direction portfolio. It was a mistake and started the year off with a loss as I was stopped out on the decline by the Dow later in the morning. Nonetheless I still believe there is some upside still left in January however the technical indicators are weak enough that the market could move to the 50 day moving average. This would not be surprising and would not be much of a correction but happening this early in January does not bode well for the rest of the year. Remember the saying, “as goes January so goes the year.” Let’s hope things pick up.
My strategy is changed just slightly as I am still selling puts as investors saw with Nucor stock today, but I am taking on smaller positions and keeping cash back. If the market should commence a rally I will place more of the capital into the market but right now it is better to take a wait and see approach.
For Tuesday Jan 7 it seems like continued weakness is the outlook from the technical indicators.
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