The market direction outlook for Friday was for stocks to be weak but if there was a bounce, investors should expect it to be short-lived. In fact we did get a bounce on Friday fueled by the better than expected consumer confidence numbers, but then a strong give-back in the afternoon. Let’s take a look.
S&P Market Direction Intraday for March 28 2014
The opening of the markets on Friday found investors enthused and buying. Within half an hour they had the S&P up to 1865 and within an hour stocks were above 1866. From there, worries over the Crimea surfaced along with some profit taking. Once again the morning high was the top for the day. Once sellers arrived, the buying slowed and sellers took the opportunity to take some profits from the one day rally. The slide lasted deep into the afternoon and pushed the S&P down to the 1853 level. Two tests of 1853 didn’t bring in much fresh buying as investors obviously decided to step to the sidelines ahead of the weekend. The rally had sputtered but the S&P still closed above 1853 for a gain of 8.58 points or not quite half a percent. The inability though to hold highs is becoming a characteristic of this market and is making Spy Put Options highly profitable as it is rapidly becoming a matter of waiting for the morning high and then buying some Spy Put Options for the afternoon drop.
Advance Declines For March 28 2014
Advancing issues still pulled ahead of declining ones with 69% of stocks advancing and 28% declining. New highs though were poor coming in at just 86 with new lows at 63. Momentum is continuing to decline which is readily evident in the lackluster new high numbers.
Market Direction Closings For March 28 2014
The S&P closed at 1857.62 up 8.58 and above 1850 again.. The Dow closed at 16,323.06 up 58.83 but it gave back a lot of the morning rally. The NASDAQ closed at 4155.76 up 4.53 but nowhere close to recovering Thursday’s loss of just over 22 points..
The Russell 2000 ETF IWM fell again today although just down 11 cents. The Russell is continuing to remain weak as investors are losing their appetite for small cap stocks.
Market Direction Technical Indicators At The Close of March 28 2014
Let’s review the market direction technical indicators at the close of March 28 2014 on the S&P 500 and view the market direction outlook for March 31 2014.
The 1750 level has been holding the S&P up since the correction ended in early February. The 1840 level is the first line of support and the 1850 continues to build more support. Thursday the market direction closed down just below 1850, but on Friday it recovered it quickly. These are good signs for the bulls but still there are a lot of warnings signals that the market is continuing to weaken.
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 has not supported the present rally to a new all-time high but on Friday for the first time of the present rally, it has turned positive. This could be a good sign.
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 continues to stay negative and the signal continues to stay quite negative..
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 still negative and has been negative since Tuesday. On Friday though it turned up while still staying negative.
Rate Of Change is set for a 21 period. The rate of change is now negative but the reading is so close to neutral the stance is really more neutral than either negative or positive.
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 for the start of this week..
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 Monday the market direction will be higher.
Market Direction Outlook And Strategy for March 31 2014
Friday was an up day but disappointing. The market direction technical indicators though have shown a number of changes despite the big give-back in Friday afternoon. The indicators are becoming mixed. Momentum and the fast stochastic have turned positive. The slow stochastic, and MACD remain negative in their outlook. The Rate Of Change is neutral and the Ultimate Oscillator is negative but turning back up.
We could see another attempt to rebound in the morning. I have used the morning pop to pick up Spy Put Options for trading to the downside after about 11:00 AM. I may not do this on Monday as the market may fool investors with a smaller rally in the morning and then more buying in the early afternoon. The indicators are not nearly as negative as they have been.
There are though a lot of warning signals. Not just in the US markets but from countries like Japan which is seeing heavy selling pressure. Hong Kong is also increasingly negative. As long as the next round of quarterly revenue is stronger than expected stocks should not sell-off. If though revenue numbers disappoint, stocks could be in for a bit of a spill.
I am continuing to look for opportunities for selling puts and still being careful with naked call trades as the market could surprise to the upside and drag a lot of stocks higher. Overall though weakness remains with the market direction which continues to keep volatility up and my put premiums at decent levels. The outlook for Monday is mixed but with momentum back positive, stocks may push higher. I will do an intraday update on Monday.
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