Market Direction today followed the outlook I discussed on Tuesday except the close did not see the market direction end higher. A lot of the action to the downside was caused by the overbought nature of the market at present. This was discussed yesterday. But there is also concern among investors about the economic outlook as well as the Fed once again. Conflicting arguments continue to circulate from the Fed as there remains a tug-of-war over how early to scale back the Quantitative Easing. On the economic front CPI came in slightly above forecast but when you strip out gasoline there was just a slight change. Then add in the earnings from Coca Cola, Charles Schwab and after hours, Yahoo and you can understand the disappointment from investors. While earnings were decent, revenue growth was not. This was the story with the first quarter reports as the majority of companies failed to beat earnings from the same quarter last year. Now as we enter the second quarterly reports revenue is beginning to again appear short.
Market Direction 1 Minute Chart
The one minute chart below of the S&P 500 shows that the market direction today as from the open the market direction slumped lower. Yet the market remains fairly resilient during the day and closed solidly above the lows of the early afternoon.
Market Direction Closing For July 16 2013
The S&P 500 closed at 1,676.26 down 6.24 and the Dow closed at 15,451.85 down 32.41. The NASDAQ closed at 3,598.50 down 8.99.
Market Direction Technical Indicators At The Close of July 16 2013
Let’s review the market direction technical indicators at the close of July 16 2013 on the S&P 500 and view the market direction outlook for July 17 2013.
For Momentum I am using the 10 period. Momentum over the past 3 days has been weak. However at this point there is no concern on my part as momentum still is strong enough to indicate that investors are more in a wait and see mood today as they await Bernanke’s testimony tomorrow.
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 remain strong which is a good sign despite the recent weakness. MACD has been very accurate this year so at this point I am continuing Put Selling without hesitation.
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 remains overbought and until the readings fall back, the overbought signal is still pointing to a another weak day tomorrow.
Rate Of Change is set for a 21 period. The rate of change is positive but it continues to pull back.
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 down and it remains 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 down and it too is extremely overbought.
Market Direction Outlook And Strategy for July 17 2013
The market direction technical indicators are till reflecting weakness in the markets but that’s all. At this point, there is just a bit of weakness after the recent run back up following the “Bernanke correction”. I am continuing to engage in Put Selling and at this point I am not concerned for the market direction. The underlying strength remains to the upside. Tomorrow though the market direction looks to be still soft but just a few words from Bernanke’s testimony could move the market up or down.
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