The market direction outlook for July 3 was for the S&P 500 to try once more to break through the 50 day moving average but to once more fail. This repeat performance is wearing thin but it is building a stronger base for stocks. The problem for Wednesday was it was just a half day with the markets closing at 1:00 PM. The S&P market direction moved as expected and ended up almost unchanged from Tuesday. On Thursday though, while Wall Street was closed, European and Asian stocks climbed as most are expecting stronger employment numbers on Friday.
The outlook for Friday then is all dependent on the employment numbers. Let’s take a look at the market direction technical outlook.
Market Direction and the S&P 500
My outlook for July 3 presented a number of charts. You can review the July 3 outlook here. Tonight’s chart shows the S&P 500 for the past two months. The market direction has been sideways for the past 5 trading sessions and unable to break and hold above the 50 day exponential moving average (EMA). But the market direction has also been unable to fall below the 1600 level. This very tight range, I think, will break with the employment numbers on Friday.
Market Direction Technical Indicators At The Close of July 3 2013
Let’s review the market direction technical indicators at the close of July 3 2013 on the S&P 500 and view the market direction outlook for July 5 2013.
For Momentum I am using the 10 period. Momentum remains negative but for the first time it is up near 100.00 which tells me the strength in the rally is to the upside.
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 just barely as on Wednesday, MACD closed at -0.05.
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 negative.
Rate Of Change is set for a 21 period. The rate of change is back positive on Wednesday.
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 5 2013
The market direction technical indicators are all somewhat skewed due to the short day on Wednesday, but they are all following the pattern they have set up for the past 5 trading sessions. Therefore the technical indicators are clearly showing that the strength in the market is to the upside, not the downside. This also makes sense when you consider that the majority of analysts are bearish on stocks at present.
But even the market direction technical indicators that are still negative are show clear signs that bullishness is returning. It all now comes down to the employment numbers on Friday. Good numbers will break the market direction to the upside. Poor numbers will pull the market lower but better than expected numbers could surprise investors with a stronger push higher than most anticipate.
My personal outlook is that the technical indicators will be correct and the market direction will move higher on Friday. If it does as I expect, I will be selling more puts on Friday.
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