The market direction outlook for July 5 was for the S&P 500 to try once more to break through the 50 day moving average. This did occur and the S&P market direction closed above the 50 day simple moving average for the first time since June 20. On Wednesday I had commented that the unemployment numbers could be the catalyst to push the market up or down.
Unemployment Numbers
The June unemployment numbers came in higher than expected at 195,000 and the previous two months were also revised higher. This shot up bond yields which hit levels not seen since August 2011. These numbers continue to add to the debate of when the Fed will begin scaling back its Quantitative Easing program. Goldman Sachs and JPMorgan both announced changes to their views on the Fed move to scale back Quantitative Easing. They now predict the bond buying program will begin to wind down as early as September.
US Dollar Rally and Gold’s Decline
The US Dollar which just a few years ago was being written off by analysts and investors alike, continued to climb on Friday pushing the bond market down sharply and increasing yields significantly. Meanwhile the rise of the dollar is crushing the price of gold and gold mining stocks. Gold is now down from a high of $1900 in the early fall of 2011 by about $700.00.
Market Direction Action
The movement of the market direction on Friday was interesting as the initial euphoria over the unemployment numbers was lost by 10:30 and many media pundits were calling for the market direction to push lower rather than higher. But from 10:30 forward the market direction turned back to up and pushed higher into the close with a rise of 1% and closing at the highs for the day, a bullish sign.
Market Direction and the S&P 500
The market direction push higher on Friday moved the S&P 500 back above the 50 day simple moving average (SMA) which is a bullish sign. The market is still fighting the lower highs and lower lows but I have posted a number of trades I am considering for this upcoming week especially with the July 20 options expiry just 2 weeks away and many put options still providing good premiums. Members can read those trade ideas here.
Market Direction Closing For July 5 2013
The S&P 500 closed at 1,631.89 up 16.48 and the Dow closed at 15,135.84 up 147.29 and back above 15,000. The NASDAQ closed at 3,479.38 up 35.71.
Market Direction Technical Indicators At The Close of July 5 2013
Let’s review the market direction technical indicators at the close of July 5 2013 on the S&P 500 and view the market direction outlook for July 8 2013. There are a number of important changes to review.
For Momentum I am using the 10 period. Momentum took a big jump to the upside on Friday thanks in large part to the recovery from 10:30 and the closing on the day’s highs.
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) had issued a sell signal on May 24. On Friday that sell signal ended with MACD issuing a buy signal on the S&P 500. This is a big change for MACD and the market direction in general. This is just a short-term buy signal from MACD and not a “game changer” by any stretch. But it does indicate an underlying strength in the market and MACD has been fairly accurate during the past 5 years.
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 also back positive.
Rate Of Change is set for a 21 period. The rate of change is back positive on Friday although not in a “big way”. This indicates that volume remains poor and investors are buying but there is a general lack of conviction which continues to show in the lackluster performance of the rate of change indicator.
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 8 2013
The market direction technical indicators are in agreement. The market direction is back to up. MACD issuing a buy signal which while just short-term, is a major move and could signal an attempt to push for new highs. Whether the market direction can break into new highs is difficult to judge at this point but the previous high is certainly within reach. The problem much of the market direction higher faces is that the market has already had a very good year. As well investors will remain nervous with the scaling back of Quantitative Easing over whether the market will be able to stand on its own.
For Monday though I am looking for more Put Selling opportunities. The July 20 options expiry is just two weeks away and many options still have good premiums. The outlook for Monday then is for some selling after such a big up move at the close on Friday, but in general I am looking for the market direction to continue higher.
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