The market direction on Friday was affected by three things. First is the overbought condition the market is in. Second the unemployment numbers came in better than expected as 175,000 jobs were created which was above the estimates for on average 139,000. At the same time though the employment rate rose. Next was the continuing concern over, not the Ukraine, but China and the continuing signs that the economy is slowing. To a lesser extent, is the upcoming meeting next week of the Fed chairman, Janet Yellen, but that’s not for another week yet so stocks are largely ignoring what she might have to say. That will change later this week as investors start to focus on what Yellen might discuss.
Overall then, Friday saw consolidation in the S&P and Dow and some losses in the NASDAQ.
S&P Market Direction Intraday for March 7 2014
The one minute S&P chart below shows that the level of volatility is continuing to decline. Friday saw weakness in the morning with both lower highs and lower lows, but when the market fell below 1872 around 11:00, investors stepped in and bought the market pushing it back to 1878, which by the end of the day was the close. The morning low ended up being the low for the day as the afternoon low was down at 1872 which investors bought back in again at. This continues to point to further gains as investors continue to take advantage of intraday weakness to pick up positions for trading. All of this helps to build support for the 1840 level.
Advance Declines For March 7 2014
Advancing issues made up just 41% of stocks on Friday with declining issues hitting 56% but once again new highs far outpaced new lows with 210 stocks advancing versus 65 declining. These numbers point to still high prices ahead for stocks.
Market Direction Closings For March 7 2014
The S&P closed at 1878.04 up 1.01. The Dow closed at 16,452.72 up 30.83. The NASDAQ closed at 4336.22 down 15.90.
The Russell 2000 ETF IWM was almost unchanged again closing down just 4 cents at $119.70 but intraday it hit 120.47 brushing up against the all-time high of 120.58 set back on March 4.
Market Direction Technical Indicators At The Close of March 7 2014
Let’s review the market direction technical indicators at the close of March 7 2014 on the S&P 500 and view the market direction outlook for March 10 2014. 
The 1750 level is holding the S&P up. The 1840 level looks better each day and with the S&P up at the 1878 level the 1840 level is getting stronger.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past two months, replacing MACD as the most accurate indicator. Momentum for the fourth day is moving slightly higher.
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 Feb 11. MACD has been supportive of the market direction move high but is having difficulty with stronger readings. On Friday it moved lower but it remains solidly positive and that’s more than enough to keep the market direction from falling back by much.
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 positive and continued its sideways move.
Rate Of Change is set for a 21 period. The rate of change is still bullish but starting to turn down. Monday could see this indicator move lower.
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 Monday but it is not a strong up signal. The divergence between the two signals is small. It is also very 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 signaling that the market direction is up slightly but really more neutral than up for Monday. It too is very overbought..
Market Direction Outlook And Strategy for March 10 2014
With the unemployment number out-of-the-way, the focus can shift back to the Ukrainian crisis and probably China. The VIX Index remains stubborn at the $14 level despite the move higher in the S&P. I had hoped that it would pull back further and on Friday it did fall to $13.51 but by the close it was back to above $14. I am anticipating the market direction will move higher in a choppy fashion through to possibly late April or early May and I am then wondering about a possible correction. A lot depends on how high the market direction can move between now and the end of April. Despite everything in the press, stocks are not wildly overvalued but they are not cheap. For stocks to move higher earnings must continue to improve. If earnings do improve then we may see better employment numbers in the future. Better employment numbers though means less liquidity from the Fed which could hold stocks back from any bigger move higher.
This is the kind of choppy market that can generate significant gains for portfolio if traded conservatively and carefully. I wrote an article for members this weekend looking at how to trade the market direction ETFs like the UDOW in an overbought market condition. These are the types of strategies to employ. I am continuing to look for positions to trade but I want to do this on dips in stocks.
For Monday I am expecting some weakness to start the day after the weekend and then more sideways with an eye toward holding the prices reached last week. That could be difficult for stocks to start the week and the technical indicators, while positive still point to a degree of weakness for the start of the second week of March. Overall though the outlook is for weakness with the bias still to the upside for stocks on Monday.
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