The market direction on Wednesday once more followed the outlook. The overbought condition though is eroding which is good news for a possible bounce back but other issues are weighing on investors including the G7 warning Russia not to annex the Crimea. Then pile on the nervousness over a slowdown in China and you can see why investors are jittery. That said the stocks held on and the Dow kept losses to a minimum while the S&P squeaked out a positive close and the NASDAQ and IWM both closed higher. Let’s take a look.
S&P Market Direction Intraday for March 12 2014
The one minute intraday S&P chart below is beginning to build up a pattern of a big dip in the morning when the market opens and then a push back during the day. Today was no different with the S&P falling to 1854.58 by 10:00 AM which is the lowest level in 5 days for the S&P. From there though investors bought stocks and pushed the S&P to 1868 shortly before noon. The rest of the day the S&P managed to hang on and into the close investors continued to buy and pushed stocks to a very small gain at the close.
Advance Declines For March 12 2014
Advancing issues made up 56% of stocks on Wednesday with declining issues falling back to 41%. New lows though outpaced new highs with 93 stocks setting new lows and just 70 stocks setting new highs. Momentum is fading although the number of advancing issues was higher today which is good to see, but the number of new highs is poor and must improve or the market will move lower to find more buyers..
Market Direction Closings For March 12 2014
The S&P closed at 1868.20 up 0.57. The Dow closed at 16,340.08 down 11.17. The NASDAQ closed at 4323.33 up 16.14..
The Russell 2000 ETF IWM closedup 36 cents to $118.42. To a large extent we could say that stocks are in a holding pattern by the close of the day. Let’s look at the technical picture.
Market Direction Technical Indicators At The Close of March 12 2014
Let’s review the market direction technical indicators at the close of March 12 2014 on the S&P 500 and view the market direction outlook for March 13 2014.
The 1750 level is holding the S&P up. The 1840 is now the first line of support against any a pullback. There is not significant support above 1840. It will be an easy move lower for the markets to slide to 1840 if investors become nervous.
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 is continuing to decline but is still positive and today turned sideways.
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 continued to decline on Wednesday but is still positive. The decline though was pronounced as the reading is now 1.34.
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 moved higher following the big tumble yesterday. We will need another day to determine if today’s bounce was just a technical bounce.
Rate Of Change is set for a 21 period. The rate of change is still bullish but continuing to fall showing a lack of buying interest among investors for more than just day or swing trading.
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 down again for Thursday.
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 also down for Thursday.
Market Direction Outlook And Strategy for March 13 2014
The S&P is exhibiting a rounding effect to its pattern and today’s bounce back from a new short-term 5 day low was nice to see but it could be technical in nature following 3 steady declines. Still though as an investor the market still exhibits strength although the advance decline ratio is beginning to favor a move lower to find better support. Investors are nervous as they are back to the game of trading intraday but not taking much in the way of chances for any kind of longer-term trades.
The market direction technical indicators are still split. With only the Ultimate Oscillator rising, momentum is sideways, MACD is falling, the rate of change is falling, and the two stochastic are still issuing selling signals. In that kind of environment an investor has to be prepared for more downside. Still my instincts tell me that overall the market has really not given a lot back from the recent run-up. It continues to trade near all-time highs and does not exhibit signs of making a top. Instead it seems to be exhibiting signs of waiting for the Ukraine crisis to either end or escalate and now there is a wait and see on the Fed meeting which is less than a week away.
Tomorrow we get the Weekly Initial Unemployment Insurance Claims which last week were not bad as they surprised to the downside. If the numbers are good we could see the market try to rally in the morning and then drift for the rest of the day. Technically then, the indicators are pointing to weakness but no big sell-offs. Instead they are pointing to sideways action with a very slight bias to the downside but again, nothing steep is expected.
I see no reason to alter my strategies at present and have been busy watching a number of stocks after placing trades earlier this week. I will be looking for more opportunities on Thursday.
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