The market directionoutlook for July 8 was for a move higher after breaking through the 50 day simple moving average (SMA) on Friday which generated a short-term buy signal from MACD. The mood was somewhat upbeat as investors awaited earnings from Alcoa which starts off the second quarterly earnings for the S&P 500. After the close, Alcoa posted quarterly earnings of 7 cents a share and revenue came in at 5.85 billion which was within estimates but lower than $5.95 billion from the same quarter last year. Still left with a bond rating of junk status, Alcoa is facing numerous problems with its products and a world-wide economic prospect of continued slow growth. Its revenue while still within estimates is lower than last year and that tells a lot about the economies of the world in general. It will be interesting to see how many companies can beat their revenue from the same quarter last year. That will be the signal for the market direction to be able to hold higher valuations.
Market Direction Action July 8 2013
While the media talked up the rise of half a percent again today in the S&P 500, the one minute chart actually shows a different story.
A. Typical of the recent rally back from the lows of last week, the market opened with a gap up which by 10:00 AM was over.
B, The opening high at 10:00 AM marked the high for the rest of the day and selling was more common than the media pundits seemed to realize.
C. The close ended up at the early morning gap open high. This has been a common occurrence throughout the rally back. This type of activity does not signal a strong advance ahead but instead signals that we may end up with a choppy market and more volatility in the next few days and upcoming weeks. The market direction up needs better movements and steadier grinding higher action. Today’s market is typical of a trader’s market. Stocks are quickly bought in the morning and then traded all day long. When the morning high at point B is not recovered, traders dump their morning buys on the afternoon push higher such as the period around 2:00 or 3:00 PM which is why the market direction has so much trouble throughout the remainder of the day after the morning gap opens.
Market Direction Advance / Decline
For example today on the New York Stock Exchange, 60% of stocks advanced while 38% declined. Volume though was just 59% up while 41% was down. In other words, there was an underlying current of selling going on much of the day which is indicative of a trader’s market and not investors with conviction to buy and hold stocks for future gains.
Market Direction Closing For July 8 2013
The S&P 500 closed at 1,640.46 up 8.57 and the Dow closed at 15,224.69 up 88.85. The NASDAQ was under pressure as technology stocks did not do well today. It closed at 3,484.83 up just 5.45 .
Market Direction Technical Indicators At The Close of July 8 2013
Let’s review the market direction technical indicators at the close of July 8 2013 on the S&P 500 and view the market direction outlook for July 9 2013.
For Momentum I am using the 10 period. Momentum following the big jump on Friday is up slightly more today.
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. That buy signal remained active today pointing to higher gains in the days ahead.
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 remained positive again today.
Rate Of Change is set for a 21 period. The rate of change is fell back to negative today. It was not a large move lower but it shows that a lot of selling was occurring throughout the day and investors remain cautious.
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. The Fast Stochastic is into overbought territory.
Market Direction Outlook And Strategy for July 9 2013
The consensus of the market direction technical indicators is that more gains should be seen on Tueday. The advance / decline stats though are somewhat troubling as is the Rate of Change and the continuing lack of conviction among investors. In general this rally is not being supported by those investors who buy stocks and then sell them in coming weeks or months. This is a trader’s market. That means the first sign of trouble and the trader’s will move to the sidelines.
Alcoa’s revenue is somewhat concerning but we will need to see more results before reaching a conclusion as to how revenue will be for this quarter. If revenue is unable to beat the same quarter last year, the market direction will have trouble holding higher valuations. The
The VIX Index opened the day at $14.67 but by noon it was up to $15.20. Any move below $14 will be my signal to begin to buy VIX Index calls as the market direction still looks like it could be more volatile into the remainder of the summer months. Meanwhile today I did 1 IWM Trading For Pennies Strategy trade for very nice returns and I sold a number of puts on some stocks I had mentioned on the weekend Trade Ideas, which I will post shortly. Finally, I made a change to the market direction portfolio.
While the market direction still looks like it will try to push up on Tuesday, I think it will not be a big jump but only a bit higher as investors wait for more earnings to be released. Then we should have a clearer idea as to the overall economic climate many corporations are facing at present.
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