The market direction outlook for Wednesday was for the market to move sideways and lower. Obviously that did not happen. During the day the Dow made a new all-time high and the S&P 500 recovered much of what it had lost over the past few days of weakness. Meanwhile the NASDAQ lost a bit of ground and IWM failed to move higher. With so many indexes trading near or at all-time highs the question is whether the breakout of the Dow today is the return of the Dow to lead the other indexes higher.
Dow Index As A Market Direction Leader
This has happened many times in the past. The great bull run from 2003 to 2007, the run-up of the 1990’s and the recovery after the devastation of the 1970’s grueling bear market. The market direction crash of 2008 to 2009 changed the Dow Index’s role and it became a follower. The NASDAQ Index lead stocks from the recovery to the recent highs of this year. Is that about to change? It’s actually too early to tell but the Dow had a terrific day today and it could be on the verge of leading the market to new highs. Let’s take a look at some of the daily charts.
Market Direction S&P 500 Intraday For Nov 6 2013
The intraday one minute chart below shows the market direction action for Nov 6 2013. The market opened with a big jump after comments from Fed policymaker John Williams who said the central bank should hold here until there is stronger evidence of growth momentum. Then the US dollar dipped, European stocks moved higher and the market direction in New York opened with a strong move to the upside. Within half an hour the day’s high was made.
There was the usual dip back to 11:00 AM for a morning low and then the market moved slightly higher and stayed sideways into the close. The morning high was not recaptured. There was also a morning gap at 1772 which I won’t be surprised to see the S&P try to fill early in the morning tomorrow.
I’m sorry I have not had time to post more Trading For Pennies Strategy trades but each morning I have been trading against the morning dip. It has been a spectacular trading pattern now entering its third week.
Advance Declines For Nov 6 2013
Despite the nice push higher in the Dow and S&P the numbers are more telling. The advancing issues were 52% while decliners were not far behind at 45%. New 52 week highs were just 177 and new lows 79. These are not the run away numbers of last week and they continue to show the weakness in the market direction overall.
Market Direction Closing For Nov 6 2013
The S&P 500 closed at 1,770.49 up 7.52. The Dow closed at 15,746.88 up 128.66. The NASDAQ closed at 3,931.95 down 7.92. The IWM ETF fells not quite half a percent to $109.12.
Market Direction Technical Indicators At The Close of Nov 6 2013
Let’s review the market direction technical indicators at the close of Nov 6 2013 on the S&P 500 and view the market direction outlook for Nov 7 2013.
For Momentum I am using the 10 period. Momentum is still positive and moved up slightly today.
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 Oct 14. MACD has been declining since October 22 and continued to decline today. With a reading of 0.58 it failed to move up with the climb of stocks in the afternoon. It is still on the verge of a sell signal.
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 positive.
Rate Of Change is set for a 21 period. The Rate Of Change is moving even higher. We could be on the verge of a change in direction to either down or a breakout higher.
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 It is 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 again.
Market Direction Outlook And Strategy for Nov 7 2013
Yesterday the bias in my opinion was sideways and down. For Thursday Nov 7 2013 the indicators are in general positive and the momentum indicators like the stochastic indicators are pointing to higher prices. The concern to me is the rate of change which is reaching even higher which almost always signals that something is about to happen here. Either stocks will break out and move considerably higher or they will fall.
The other concern is MACD which continues to erode to the point where another sideways day or even if down only slightly will result in a sell signal on the S&P 500. Throughout much of the later part of the rally MACD stopped expanding and began to contract. This is not a great sign for further expansion of valuations.
Yet still another concern is what drove the Dow to push higher today. It had been trending sideways and there was some concern that the Dow would pull back. Instead Fed comments again juiced the market direction higher. If Fed liquidity remains for into the early part of 2014 it will be hard for the markets to pull back and even if they do the correction will probably be very shallow.
Finally, the market direction new high from the Dow needs to be confirmed tomorrow with a opening that is reasonably strong and a closing high that is higher than today. For tomorrow then my outlook is still sideways with a bias to the downside but there is enough excitement over the Twitter IPO that we could see some additional buying in technology stocks and in the market in general. Still though the technical indicators while pointing toa possible higher day tomorrow continue to look weak. I still think the outlook is sideways with a bias lower.
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