The market direction outlook for Friday was for the market direction to continue higher. There really are two key points to the rally at this stage. The first is the continued support for the idea of more quantitative easing by Yellen who may well end up being the next Federal Reserve Chairman. The second is the lack of any solid information showing that the economy is not only not improving but slowing. We have had two weeks of minor news and economic stories which has definitely helped feed the buying into stocks. Meanwhile despite what the bears continues to talk about the overall economic picture has not really changed all that much over the past several months. While here and there we get a spot of bad news there really has not been any great news either to show strong economic growth which could lead to a scaling back of Quantitative Easing early. The chance of a withdrawal before year-end definitely seems unlikely. Added to this is the lack of seriously bad news and the market is able to keep pushing higher.
Weekly Initial Unemployment Insurance Claims
On Thursday last week the initial unemployment benefits fell by only 2000 to a seasonally adjusted 339,000. Meanwhile the prior week was revised up by 5000 claims. Overall while the numbers keep moving in the right direction they also show that growth remains anemic and very slow. These continual weekly initial claims fit right into the outlook that the economy is really more “ho-hum” rather than humming along. That suits the investor crowd who continue to look for the Fed to keep Quantitative Easing alive which in turn they believe puts a floor under stocks.
Market Direction S&P 500 Intraday For Nov 15 2013
The 1 minute market direction chart for the S&P 500 below show the action for Friday. The morning was choppy but each dip was bought and the market direction pushed higher until late morning. There was some selling into the lunch hour but just as before, when the morning lows were not taken out, the lunch hour lows held and the market pushed back to the morning high by early afternoon. That definitely enthused investors who spent the rest of the afternoon pushing stocks higher. The rise into the close saw a small amount of selling in the last half hour and then a quick dash to a new high to close the week.
Advance Declines For Nov 15 2013
Friday was almost identical to Thursday. Advancing issued outpacing declining issues with 63% of all stocks advancing versus 33% declining. This was the exact same percentages as Thursday and almost identical to Wednesday as well. New highs were up to 245 and new lows 75.
Market Direction Closing For Nov 15 2013
The S&P 500 closed at 1,798.18 up 7.56 to another new high and ready to easily break 1800. The Dow closed at 15,961.70, up 54.59 and another new high as well. The NASDAQ closed at 3,985.97 up 13.23.
The IWM ETF closed at $110.83 up .43 and closing in on its all-time high of $111.62.
Market Direction Technical Indicators At The Close of Nov 15 2013
Let’s review the market direction technical indicators at the close of Nov 15 2013 on the S&P 500 and view the market direction outlook for Nov 18 2013. Just a reminder that I have made a few changes to the technical signals to assist all of us in following the signals. I am including the S&P 500 daily chart for just over a month and I will be showing support lines as well. I have also dropped some arrows from those technical indicators that have more than one reading to follow, such as the stochastic indicators and MACD. With the other indicators the red arrow is pointing to today’s signal and is not an indication or up or down.
The most important support line in the S&P 500 at this time in the ongoing rally remains 1750. That support line is holding the market direction up at present.
For Momentum I am using the 10 period. Momentum is positive today and 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 sell signal on Nov 7 which was not confirmed. The signal of Nov 14 was market up and it was confirmed on Nov 15. Therefore the confirmed direction is up.
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 back to being heavily overbought.
Rate Of Change is set for a 21 period. The Rate Of Change moved sideways once again on Friday and is signaling little change ahead for tomorrow.
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 and it is extremely 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 and it is extremely overbought. The D% reading is maintain pace with the K% reading which could signal some weakness on Monday but the signal continues to point to up.
Market Direction Outlook And Strategy for Nov 18 2013
The strength to the present rally is not unprecedented. This has happened many times before. What is interesting is the growing number of investors, both retail and professional who are convinced the direction remains higher. There has not been negative news as of late. Most of the big cap stocks that disappointed with poor earnings have seen their stocks recover.
The indexes are however reaching the point where some traders may begin to take profits. The market direction throughout the recovery from the 2008 bear market has shown a problem breaking decisively through the big round numbers when both the S&P 500 and the Dow each approach a round number at the same time. Often when a big round number has appeared, the markets break through but then keep back testing until they finally break free. The Dow at 15,000 is definitely a good example. You can see in the chart below that the 15000 level took many months of back filling before finally breaking free.
Last year the S&P 500 spent almost the entire year decisively breaking free of 1300 and then 1400.
With the S&P now within a few points of 1800 and the Dow almost at 16000 we could see some waffling here. Overall though all the market direction indicators remain positive on the market direction.
I see no reason to adjust my outlook or my strategy. Many big cap stocks have been pushed too high in my opinion but then I change my strategy slightly to accommodate some of their elevated levels to protect my positions from a possible assignment at too high a price.
At this point in the market direction rally many investors who enjoy Put Selling begin to look for Junior stocks that have not done as well or are still offering fatter put premiums. This tendency to go after more lucrative Put Selling trades is understandable, but I have no interest in following it. Instead I prefer to look at the big cap stocks in my portfolio that have moved higher and determine how strong the push higher really is. If there is strength, then I am continuing to sell put options and maintain a close watch on the market direction in general
For Monday then the market looks still ready to push higher but we could see some sideways action as we approach 1800 on the S&P and 16,000 on the Dow. Overall the direction is still up.
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