The market direction outlook for Tuesday was for more weakness. Instead the November trade deficit numbers finally jump started stocks. The trade deficit decreased by 13% which analysts believe will boost the GDP numbers from an expected 2.5% to 3%. Overall the belief is that the economy is doing well. Meanwhile two Fed Presidents seemed to be at odds with one another. Boston Fed President Rosengren said he felt that the bond buy program should be wound down only gradually which is what outgoing chairman Bernanke had indicated would happen. Meanwhile San Francisco Fed President Williams said the bond buying should end this year.
Unemployment Numbers
This Friday we get the monthly unemployment numbers and they may end up being better than expected.
Alcoa Earnings
On Thursday Jan 9 we should be getting the Alcoa earnings number. The general consensus is around 5 cents which is a penny shy of the same quarter last year. This starts off the next round of quarterly revenue and earnings reports. Analysts have lowered their expectations for the 4th quarter to a rise of 6.3 %. Originally analysts had been looking for 9.3 percent growth.
US Dollar
The US dollar took a big jump today against many currencies including the Canadian dollar which is now down at levels last seen in 2009. The dollar may be one of the prime reasons for the decline in gold. Yesterday gold prices plunged but managed to recover. Today they closed down only slightly but gold is under pressure and I think a lot of that pressure is from the rising US dollar.
If the unemployment numbers are strong enough analysts believe the US dollar will rally and that could assist in the Federal Reserve chopping more than $10 billion from the next month’s tapering of their bond buying program. Stocks could face a lot of headwinds this year.
Market Direction S&P 500 Intraday For Jan 7 2014
The market opened higher today and unlike yesterday, buying was constant and steady until around 10:45 when the market made a top at 1840.10. That proved to be the high for the day. After that the market drifted sideways for most of the day with a small dip in the afternoon that was quickly bought into. The market never regained the morning high but came close three times late in the afternoon. The close was just off the high. All of this action is bullish for stocks for tomorrow.
Advance Declines For Jan 7 2014
Advancing issues far outpaced decliners with 33% of stocks declining while 64% advanced. There were 144 new highs and just 71 new lows. Again this action is bullish for stocks.
Market Direction Closings For Jan 7 2014
The S&P closed at 1837.88 up 11.11. The Dow closed at 16,530.94 up 105.84. The NASDAQ closed at 4153.18 up 39.50.
The IWM ETF closed at 114.71 up 95 cents for a gain of 0.84% and putting it back within a day or two of the all-time high of 115.97.
Market Direction Technical Indicators At The Close of Jan 7 2014
Let’s review the market direction technical indicators at the close of Jan 7 2014 on the S&P 500 and view the market direction outlook for Jan 8 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 today turned back up and looks ready to push beyond 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 is positive and moving sideways at present.
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 is barely 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 sitting just above neutral.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 12th day and is moving sideways.
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 but it looks ready to issue a buy signal if the market moves higher tomorrow.
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 signaling the market direction is back to up.
Market Direction Outlook And Strategy for Jan 8 2014
The market direction technical indicators are now split with 1 neutral, 1 negative and 4 positive. Although MACD is only barely positive it still is counted in the positive camp. For tomorrow then the technical indicators in general are looking for more upside.
Today’s move was all done in the first hour or so. The rest of the day investors basically were positioning themselves. The advance decline ratio strongly favors more movement to the upside.
For my strategy nothing has changed. I am continuing to seek opportunities which you can see from my trades today. Tomorrow I won’t be surprised by some weakness in the morning, perhaps mid-way but then I am expecting a higher close.
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