Monday was all about the debt ceiling and the concern investors have that this could disrupt the ongoing economic recovery. What was the most interesting aspect of Monday was that the market plunged at the outset and then basically traded all day right at the support level of 1680. If you recall, this was the second level of support in the most recent rally, which I have discussed repeatedly. The first level was 1700 which the market broke. From there the market has slowly crumbled down to 1680 which has a lot more support than 1700.
Market Direction Intraday Chart
If you look at the one minute intraday chart you can see today’s trading action. Once again, the market made a low in the morning and then rallied back. This continues to profit my trading for pennies strategy trades. Each day I have brought in significant returns. I look for that big low and then buy at the very first signal.
The other interesting aspect of today’s Market Direction chart is how often the market direction held around 1680. Many investors feel that technical investing makes no sense and while I understand their outlook, I believe they are wrong. Investing is all about emotions. Investors tend to be incredibly emotional people and this leads to support and weakness within not just the markets but stocks in general. These become easily identifiable points which leads to understanding of the technical merits of studying trading patterns among investors. I have marked in blue arrows below all the 1680 levels today. At the close the market pushed back to support at 1680. Interesting isn’t it.
Trading For Pennies Strategy Comments
My comments yesterday about the Trading For Pennies Strategy and the many investors who are using it resulted in quite a few emails today. Many investors are enjoying good gains from the strategy. I thought though this comment from Rich was worth mentioning this evening.
“Teddi,
I always look forward to your direction outlooks. I read with interest the email from Ira and the trade made on the 169 SPY at 2.17 sell for 2.27 for .10 gain. What seems to kill trades for me is the commission charge using TOS. That trade would have cost me–in & out–$110. Even when I do small trades 20-30 contracts it’s $25 in and $25 out. Bingo, I’m down $50 bucks from the get go. Anyway, just a comment. Thanks for all your fine work.
Rich”
I just wanted to mention that commissions should be negotiated whenever possible. Review how many trades you are doing and what other discount brokers offer in the way of commissions. Then call your broker and push for better rates. Sometimes you may have to increase your capital being held at your discount broker as they want to see capital they can invest while you trade. Other discount brokers though just need some prodding to get better rates. When trading with a strategy such as the Trading For Pennies Strategy you have to seek better commission rates.
Advance Declines For Sep 30 2013
While the decline may have looked pretty bad by the index declines, the declining stocks made up 58% of the volume and advancers 39%. This is definitely far from the worse numbers we have seen over the past couple of weeks and is a warning that the decline we are seeing is being caused by non-economic events. New highs were 74 versus new lows of 88. Again these are not dramatic numbers considering the decline in the indexes.
Any good news could turn this market direction right around so be cautious when trading the downside and take profits.
Market Direction Closing For Sep 30 2013
The S&P 500 closed at 1,681.55 down 10.20. The Dow closed at 15,129.68 down 128.57. The NASDAQ closed at 3,771.48 down 10.12. The Russell 2000 ETF, IWM was up just 0.03, but it was still up, again a warning to watch trading to the downside. Use tight stops on trades aimed at profiting from the downturn.
Market Direction Technical Indicators At The Close of Sep 30 2013
Let’s review the market direction technical indicators at the close of Sep 30 2013 on the S&P 500 and view the market direction outlook for Oct 1 2013.
For Momentum I am using the 10 period. Momentum is now 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) today issued a sell signal on the S&P 500. We need to see confirmation of this sell signal tomorrow.
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.
Rate Of Change is set for a 21 period. The rate of change is the only indicator that continues to show that there is a lot of interest in buying stocks. It is trending sideways on Monday and slightly lower from Friday’s reading.
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 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 for Tuesday is lower.
Market Direction Outlook And Strategy for Oct 1 2013
I don’t want to guess at the market direction and the chance of a bounce back at the open tomorrow. The market direction technical indicators are all pointing to a lower day tomorrow, so I will not argue with their outlook.
Instead I want to mention once more that caution to taking on too many trades to the downside should be exercised. The debt ceiling crisis is causing a lot of this anxiety among investors. Tomorrow is a new month and often the first day of a new month sees buying enter the markets.
As well stocks have pulled back enough that some are looking a bit attractive for investors. Any kind of good news could be taken as a catalyst to push stocks back up. I am using tight stops on my positions to the downside so that if the market jumps back I at least will get out with a profit of some kind.
For Tuesday then I have to go with the Market Direction Technical Analysis which shows that the direction is still lower, but my instincts tell me to be careful betting too heavily to the downside just yet.
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