The market direction outlook for Wednesday was for weakness in the morning and then a push back in the afternoon for a close in the green. I had expected weakness due to the Fed comments late in the day on Tuesday which I had expected investors would pick up on. But there was a lot more for investors to mull over. ADP reported payrolls improvements in the range of 238,000 for December. Anything above 250,000 means the economy is really picking up steam. That means the Fed can look to taper more and quicker which is exactly what investors had hoped to avoid. Friday we will get the unemployment numbers and that could see some gyrations in the market. Meanwhile tomorrow (Thursday) we get the Weekly Initial Unemployment Insurance Claims and that number should be interesting as well.
Overall the market direction technical indicators are having trouble with the emotions of investors. Investing is always an emotional roller coaster and this week has been typical. The same can be said for the indexes themselves with the Dow down deep at one point today and closing down 68.2 points while the S&P closed barely unchanged from Tuesday and the NASDAQ closed up on the day.
Overall I think the market really is trying to push higher but investors are back to their nervous ways which is showing in the market direction swings.
Alcoa Earnings
Just a quick reminder that tomorrow we get Alcoa’s earnings to start off the next quarterly revenue reports. Anything worse than 5 cents and we could see stocks sell lower as analysts have already downgraded their outlook several times over the past month and a half.
US Dollar
The US dollar took another jump today against many currencies including the Canadian dollar which is still down to levels last seen in 2009. I mentioned yesterday about the US dollar and its impact on gold. Gold was lower again today keeping miners under pressure. Meanwhile more and more analysts are calling for gold to break long-term support at 1200 and fall to at least 1100 by spring. If that happens gold miners will get trounced again which will mean great profits for those of us who sell options for income.
Market Direction S&P 500 Intraday For Jan 8 2014
The market opened lower despite the bullish close yesterday. A short rally failed and the market then put in the low for the day before 10:00 AM. From there the market staged a decent rally which failed to break through 1840. 1840 is rapidly becoming resistance for this market. The market then spent the rest of the day basically declining. Toward the end of the day the market sold off only to have buyers step back in and push the S&P back up to close down only by a small margin from yesterday’s close.
Advance Declines For Jan 8 2014
The market changed direction again today with declining issues outpacing advancers. 54% of stocks were declining while 42% advanced. Once again though new highs dominated with 165 new 52 week highs and only 79 new lows. Once again this action is bullish for stocks.
Market Direction Closings For Jan 8 2014
The S&P closed at 1837.49 down just 0.39. The Dow closed at 16,462.74 down 68.20. The NASDAQ closed at 4165.61 up 12.43.
The IWM ETF closed at 114.86 up 0.15.
Market Direction Technical Indicators At The Close of Jan 8 2014
Let’s review the market direction technical indicators at the close of Jan 8 2014 on the S&P 500 and view the market direction outlook for Jan 9 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 turned back up but continues to have trouble pushing through 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 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 turned negative. The negative reading is small but it is still negative meaning a sell signal was generated. This has to be confirmed by another more negative reading.
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 negative.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 13th day abut is moving lower.
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 but yesterday it was signaling lower. This shows the whipsaw and uneasiness among investors.
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 pointing to up yesterday and today at the close it is still pointing to higher prices.
Market Direction Outlook And Strategy for Jan 9 2014
The market direction technical indicators re once more mixed. MACD issued a sell signal today and the Ultimate Oscillator is negative. Then there is the momentum and rate of change indicators both of which are moving lower. Finally we have the two stochastic indicators both of which are pointing to a higher day tomorrow. You can see then just how mixed the signals are. This is the kind of market to be very cautious in.
If we look at the chart below of the past 6 trading days you can see what is often a typical pattern before a market decides to correct lower.
A. Dec 31 the market sees a new all-time high.
B. The following day that high is not confirmed but instead the market sells steeply lower.
C. Two days later the market pushes lower and then closes off the low. Many investors think this shows the market made a bottom and is ready to move higher.
D. The market bounces back up and closes near the high for the day sending a bullish signal.
E. The following day though the market fails again to confirm the move higher.
Often this type of pattern is followed by a lot more selling. It is something to be aware of. Also the first five day theory for January if believed, is now indicating that the year will disappoint investors since we have had almost all down days to start off the year.
This is still the bullish time of the year but there are lots of problems for investors. I think the market has probably a chance for a bounce tomorrow but just as much of a chance to fall lower. I am not expecting anything major before Friday’s unemployment numbers.
Stay careful and cautious until we get a clearer picture of where the market direction is heading. I will be selling smaller quantities of put contracts again and will be more cautious here, at least until Friday.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links
Market Direction IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info