The market direction outlook for the first day of July was for the S&P 500 to try to recapture the 50 day moving average. The three-day rally from last week broke through 1600 as resistance and has managed to stay above 1600. However the market has tried 3 times to break above the 50 day moving average and each time has pulled back. Today there were all kinds of rumors as to why the market direction which was solidly higher at the open on news that the ISM manufacturing index rose to 50.9% from 49% in May. These numbers while certainly better than May (anything above 50% is considered expansion) were exciting to investors but they still pale when compared to numbers prior to the 2008 credit crisis when 50.9% would have been considered anemic. But the numbers also showed that factories are laying off people, which may have helped account for the sell-off during the afternoon. The crisis in Egypt is also being reported as a reason for the sell-off.
Market Direction Chart for July 1 2013
The one minute chart below for July 1 shows the action. The day started with a gap up which is becoming typical of this market direction rally. The high was set early in the day and the market managed to hold above the 50 day moving average for almost two hours and then selling pushed the market back down below the 50 day moving average. I am not sure there is a lot to read into the afternoon selling. The move back above the 50 day moving average would bring in sellers and that could have been the reason. A lot of analysts blamed the Egyptian riots. I think it was a combination of factors.
Market Direction Chart for July 1 2013
The daily chart below shows that today marked the third attempt to break back above the 50 day moving average. The close back below the 50 day moving average could easily be caused by the 3 day rally back which saw triple digit gains daily and placed a lot of stocks back into overbought territory. This often brings in sellers which may have been part of the cause for the sell-off back below the 50 day moving average in the afternoon today.
Market Direction Closing For July 1 2013
The S&P 500 closed at 1,614.96 up 8.68 and the Dow closed at 14,974.96 up 65.36. The NASDAQ closed at 3,434.49 up 31.24. Overall the day’s rally disappointed a lot of investors. At one point the Dow was up more than 160 points. meanwhile though the NASDAQ is having very good days and today it enjoyed almost 1% in gains.
Market Direction Technical Indicators At The Close of July 1 2013
Let’s review the market direction technical indicators at the close of July 1 2013 on the S&P 500 and view the market direction outlook for July 2 2013.
For Momentum I am using the 10 period. Momentum remains negative and is almost unchanged from Friday.
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 sell signal on May 24. The sell signal is still active but MACD is continuing to rise although it will need further up days to turn to a buy signal.
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 still clinging to positive readings.
Rate Of Change is set for a 21 period. The rate of change is negative for the 15th day which is reaching into the record book.
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.
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.
Market Direction Outlook And Strategy for July 2 2013
The outlook for July 1 was for the market direction to try to move above the 50 day moving average. This was accomplished but then investors sold off the rally and the 50 day moving average was lost. Still though the market direction technical indicators are primarily bullish which is a good sign. Two indicators that are still a concern are momentum which has absolutely refused to support this rally with any positive readings and MACD which has remained negative. On the other side are the two stochastic indicators which are almost as powerful as momentum and MACD.
I believe we could see the market direction try once more to push above the 50 period moving average, but three attempts has been made and all three have failed. We could therefore see another attempt and another failure and then the market direction may turn back lower for a day or two to try to rebuild support for a stronger push higher.
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