Market Direction Outlook For March 20 2014 – Split Following Yellen’s Comments

The market direction outlook for Wednesday was for stocks to trade sideways in the morning and then move up or down based on Chair Yellen’s comments. Her slip about interest rates spooked investors although in general the belief had always been that sometime in 2015 interest rates would begin to rise. Still her comment gave some time basis to what had always been rumored and that’s all it took for investors to send the markets lower. I indicated in the final line of the market direction outlook comments last night that:

“Any pullback in market direction tomorrow should be traded in my opinion. I know if there is down action it will see me selling more puts on the stocks in my watch list.”

This is exactly what I did. I did two market direction trades, one which was a complete failure and a second that more than made up for the first. I then did trades in Intel Stock, Disney Stock which is a rare one for me, McDonalds Stock, Aflac Stock in which I did two trades and Apple Stock. The panic selling was way overdone but we know that investing is all about emotions and when investors start selling, more join in. The push took the Dow down over 200 points before it recovered to close down 114.02 points. Most of the trades done were in stocks mentioned in my article this weekend on 12 Trade Ideas and then I reviewed them again on Wednesday morning before the markets opened in this article so those investors who did not make trades could see what trades I had already done and read the discussion of what trades I was still thinking of entering.

2014 is a tougher market for easy trading but the profits are beginning to outweigh the profits earned in 2013 especially with Put Selling. I had expected that this year I might earn 20% for my portfolio but with all the volatility I am beginning to wonder if the returns will be double that. As 2014 definitely appears to be a stock market year where investors will need a bit more strategizing I will be adding more stock reviews and trade ideas to the website including some trade ideas for investors who are working and have limited time to be doing trades during regular work hours.

S&P Market Direction Intraday for March 19 2014

The morning action was as expected with the market direction drifting sideways. The S&P then moved lower anticipating the conference and finally as Yellen spoke the market stayed lower but steady until the comment on interest rates. The market plunged to 1850.65. It then rose to close down for the day at 1860.77.

SPX Market Direction Mar 19 2014

Dow Market Direction Intraday for March 19 2014

The Dow followed the same course as the S&P but easily broke through support at 16200 plunging to 16127.80 over 200 points before closing back just above 16200.

Dow market direction March 19 2014

Both indexes on the day easily fell showing just how nervous investors are with the markets sitting near record highs. The plunge will have rattled investors’ nerves a bit so tomorrow could be interesting. The main message to take away from Fed Chair Yellen’s comments though is that if interest rates do move up even slightly, it is a sign that the economy is continuing to improve. Whether rates can move up by much even into 2015 may be questionable but shortly we will begin to get more numbers after the freezing weather and that should provide some basis for understanding how much impact the cold weather did have on the economy this winter.

Advance Declines For March 19 2014

The plunge means that 74% of all stocks were declining today and just 24% advancing. New highs though are still outpacing new lows with 134 new highs versus 79 new lows.

Market Direction Closings For March 19 2014

The S&P closed at 1860.77 down 11.48. The Dow closed at 16,222.17 down 114.02. The NASDAQ closed at 4307.60 down 25.71.

The Russell 2000 ETF IWM fell along with the rest of the market in the afternoon but partly recovered to close down 0.78 to $119.00.

Market Direction Technical Indicators At The Close of March 19 2014

Let’s review the market direction technical indicators at the close of March 19 2014 on the S&P 500 and view the market direction outlook for March 20 2014.

market direction technical analysis Mar 19 2014

The 1750 level has been holding the S&P up and now the 1840 level is the first line of support. The plunge in the S&P today failed to come close to breaking through the 1840 level stopping at the 1850 level before attempt to recover. Today’s plunge did not change the overall outlook on the market direction at this time for the charts.

For Momentum I am using the 10 period. Momentum has been the best indicator over the past three months, replacing MACD as the most accurate indicator. Momentum unfortunately continues to not show support for this rally and today’s plunge kept momentum negative.

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 Feb 13. MACD had started to rise but today it turned down although not by a significant amount.

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 negative following today’s afternoon plunge.

Rate Of Change is set for a 21 period. The rate of change is still positive and did not change much with the day’s plunge showing that a lot of investors were buying the plunge.

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 still 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 signaling that the market direction is also still up.

Market Direction Outlook And Strategy for March 20 2014

Tomorrow is bound to be interesting. Fed Chairman Yellen was cautious with her comments as if trying to not make a slip or mistake. Unfortunately the mention of “around six months” for a possible rise in interest rates is all it took to plunge the markets. I don’t think this will have a lasting effect but we could see sideways action tomorrow. The technical indicators are split. Momentum, MACD and Ultimate Oscillator are negative and the two stochastic indicators and Rate Of Change are positive on the outlook for a rise on Thursday. We also get the Weekly Initial Unemployment Insurance Claims in the morning before the markets open.

I took advantage of the plunge and sold puts and did some spreads. I will be looking for more opportunities tomorrow and have placed some on the members website. Overall I think the drop will be forgotten shortly but sometimes these types of events come back to haunt the market. Overall though I thought the recovery was fairly decent after the plunge.

For Thursday I am expecting sideways action with and a bias to the upside although the technical indicators are pointing to the market direction drifting sideways with almost an equal chance of the market moving up or down.

Market Direction Internal Links

Profiting From Understanding Market Direction (Articles Index)

How I Use Market Timing

How I Use Market Timing

Understanding Short-Term Signals

Various Market Timing Systems

Market Direction Portfolio Trades (Members)

Market Direction External Links

Market Direction IWM ETF Russell 2000 Fund Info

Market Direction SPY ETF 500 Fund Info