The market direction outlook for July 10 was for weakness with the overbought condition and for the market to still try to creep forward and squeeze out a gain. While the Dow market direction ended slightly lower both the S&P and the NASDAQ market direction was just slightly higher which was in keeping with yesterday’s market direction outlook.
Fed Chairman Changes The Game Again
After hours, Fed Chair Ben Bernanke was speaking at Cambridge, Massachusetts and indicated that sustained stimulus was still going to be needed. In a somewhat stunning comment, Bernanke said that “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.” Yet in the Fed June’s minutes half of the 19 participants thought the bond-buying program should be halted by the end of this year with the other half believing better jobs numbers were needed before making any changes to the ongoing Quantitative Easing program.
At the time of writing this article the Dow futures are already up over 150 points and precious metals and Treasury Bonds and Notes are up and the dollar is tumbling on the comments from Bernanke. So basically it would appear the same man who started the most recent stock market correction with his comments about scaling back the present bond-buying program has now become the man who may push stocks right back up.
Market Direction Action for July 10 2013
There is no real value to review today’s market direction action as the Fed Chairman’s comments would appear to be a game changer for stocks. Therefore let’s move on to the market direction technical indicators for today.
Market Direction Closing For July 10 2013
The S&P 500 closed at 1,652.62 up just 0.30 and the Dow closed at 15,291.66 down just 8.68. The NASDAQ closed at 3,520.76 up 16.50 .
Market Direction Technical Indicators At The Close of July 10 2013
Let’s review the market direction technical indicators at the close of July 10 2013 on the S&P 500 and view the market direction outlook for July 11 2013.
For Momentum I am using the 10 period. Momentum is climbing rapidly and is now overbought. Despite being overbought though, momentum is definitely with the bulls.
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 July 5. That buy signal remained active today pointing to higher gains in the days ahead and ended today’s trading with a big jump. MACD is signaling that the market direction will continue higher. This is excellent news for those of us who love Put Selling big cap stocks and for my market direction portfolio trade.
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 now overbought and is pointing to higher gains ahead.
Rate Of Change is set for a 21 period. The rate of change is mildly positive. I am expecting this to change dramatically with the comments from Bernanke.
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 up but it is extremely overbought.
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 direction is up. The Fast Stochastic is into extremely overbought territory.
Market Direction Outlook And Strategy for July 11 2013
Obviously Bernanke is doing a bit of an about-face at this point in the Quantitative Easing game. This means stocks once more can look for that “Bernanke Put” to support them. A while back I wrote an article entitled Dance Near The Exit which looked at the ongoing party the Fed is hosting for investors. In that article why I was investing following the market crash of 2008. Since then the Fed has been stimulating the economy and inflating stock valuations. This is one of the longest parties I have ever attended. Bernanke’s comments will obviously change the game at this point and the market direction should continue higher even with the present overbought condition.
Market manipulation is nothing new. Sometimes manipulation of stocks is not even the actual goal but just a side effect of a policy change. That is probably the result here but obviously investors such as myself who enjoy Put Selling for income will be busier now.
Put Selling Strategy
I will be staying with those stocks that I believe will continue to climb higher following Bernanke’s comments. That means big cap, dividend paying stocks like JNJ Stock, PEP Stock, MCD Stock and others from my portfolio. I will be increasing the number of put contracts when put selling and I will move closer to at the money rather than staying further out of the money with my put selling.
Interest Rate Sensitive Stocks
I believe some of the interest rate sensitive stocks like Manulife Financial Stock (MFC) which I have accumulated in my retirement account for a few months now, will probably pull back. I will consider selling in the money covered calls a month out on those types of stocks in my retirement portfolio.
Gold Miner Stocks
Meanwhile the Gold Miners that are so badly beaten up will probably rally here for a few days. I believe gold is in a serious bear market but bear markets always have stunning rallies and this may prove to be one such rally. Call options may work well on gold miners, but I believe by tomorrow morning the market makers will have already adjusted the call premiums so the better move could be owning some beaten up gold stock for a quick bounce.
Utilities Stocks
My favorite utility stock for my retirement portfolio is Fortis Stock (FTS) which trades on Toronto. This stock has been wonderful for trading. It has been stuck in a tight range for months. These comments will probably push many utility stocks up as many are very oversold.
Market Direction Portfolio
For FullyInformed members, I have not moved up the stop-loss for the portfolio. I do not want to be whipsawed out at this point as I believe stocks are heading higher here.
IWM Trading For Pennies Strategy
I had leaned toward the put side of IWM Trading For Pennies Strategy today and was probably going to keep my bias to puts rather than calls on Thursday but after the Fed’s comments my bias for the Trading For Pennies Strategy will be calls.
Committing More Capital
I will be committing more capital and increasing margin use starting tomorrow.
You can see then that I believe Bernanke’s comments will get the market direction higher through much of the summer months. I plan on being there throughout and I really should be sending out a Thank You card soon to the Fed Chairman even though the party is obviously not officially over yet.
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