Market Direction today followed the outlook I discussed in my weekly outlook for stocks which was weakness but still up. The stock market is facing stiff resistance as it reaches into all time highs and an overbought environment. Despite this the market direction action today was certainly encouraging. Citigroup turned in better than expected earnings but other data showed retail sales were flat aside from higher gas prices and auto sales. The report on consumer spending was the weakest since January. Meanwhile news that the quarterly GDP figure may show growth of just 1% kept investors enthusiasm under wraps.
Market Direction 1 Minute Chart
The one minute chart below of the S&P 500 shows that the market direction started with a small gap up and then turned negative. By 9:30 the negative sentiment over the GDP forecast was forgotten and stocks turned higher. The market direction closed up and saw all time new highs but the close was weak as overbought pressure continues to mount on the market direction push higher.
Market Direction 3 Month Chart
The S&P 500 3 month chart is encouraging. In May when the S&P 500 made all time new highs, you can see by the red arrows at point A that the market direction did not close near or at the highs. Instead, each day the market direction closed lower than the highs.
Looking at the present rally which is point B in the 3 month daily chart below, the blue and black arrows show that at present the market direction is closing near the highs and on positive volume. This gives support to the outlook that even if there is another correction at this point, there is a lot of support in the market direction move to new all-time highs. This is encouraging to say the least. The market looks like it could move higher. If there is another correction over the next week or so, the market direction should resume moving back higher after any such correction.
Market Direction Closing For July 15 2013
The S&P 500 closed at 1,682.50 up 2.31 and the Dow closed at 15,484.26 up 19.96. The NASDAQ closed at 3,607.49 up 7.41 .
Market Direction Technical Indicators At The Close of July 15 2013
Let’s review the market direction technical indicators at the close of July 15 2013 on the S&P 500 and view the market direction outlook for July 16 2013.
For Momentum I am using the 10 period. Momentum yesterday and again today is turning lower. It remains positive but the pullback in momentum is not the best sign for a continuation of the the move higher in market direction 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 July 5. The buy signal is continuing to climb which is a good sign for a continuation of the rally.
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 remains overbought and until the readings fall back, the overbought signal is now pointing to a possible weak day tomorrow.
Rate Of Change is set for a 21 period. The rate of change is positive but just like momentum it too is turning down illustrating that investors are taking profits at the new all-time highs in the markets.
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 and the readings between the K period and D period are closer to signaling a neutral outlook rather than an up outlook.
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. The readings though as similar to the Slow Stochastic and point to a more neutral outlook rather than strongly up.
Market Direction Outlook And Strategy for July 16 2013
The market direction technical indicators are beginning to turn in mixed outlooks as the overbought market is starting to erode the positive readings. Momentum turning down and being confirmed by the downturn in the Rate Of Change is a bit concerning at this point, but the readings are still strongly positive. MACD is still pointing to higher prices ahead while the Fast Stochastic and Slow Stochastic are both showing that the extreme overbought nature of the market could move the entire market back lower.
The overbought condition of the market should provide Put Selling opportunities and that is what I am keeping an eye on. I won’t be surprised to see some pullback again tomorrow as the overbought condition continues. This should push up volatility making put premiums attractive.
For Tuesday then I believe we will see continued weakness in the market direction in the morning to early afternoon but I believe there is enough indication from the technical indicators for another slight rise in stocks into the close tomorrow.
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