Stocks got a lift on Monday from two key events. The move between Russia and the US to come to an agreement on the Syrian Issue and the announcement that Summers will not be in the running for the Fed Chairman’s job. Both of these were the catalyst to push stocks higher today. I had expected the market direction to stay more sideways with a slight bias up as the market direction advance is overbought and the Fed announcement on Tuesday may call into question a scaling back of quantitative easing as early as this month. Most analysts now believe the Fed will delay the reduction until at least October.
Market Direction Action for Sep 16 2013
The 5 minute chart shows today’s action. A big gap open commenced the day and then a slightly further high around 12:00 PM. From there is market direction turn lower and a gradual erosion took place. The market direction is extremely overbought now and today’s action, while exciting, was unable to hold the gains made earlier in the day.
Apple Stock Breaks Support
Apple Stock took a hit again today which in turn hurt the NASDAQ Index which closed lower today. Apple Stock broke support at $465. This is support that goes back almost 6 months. A lot of investors were holding shares around the $465 price range. When the $465 broke volume shot up as sellers entered the market dumping their shares. Even Carl Icahn couldn’t hold back this volume. The 3 month chart below shows that once the $465 broke the next level of light support is at $425 and from there is goes down to $390 to $395. You can see in the chart below the rising volume. Momentum is decidedly negative. The slow stochastic is extremely oversold but still points to lower valuations ahead. Meanwhile MACD issued a sell signal on August 27 and has not wavered. I rolled my puts lower again today.
Advance Declines For Sep 16 2013
Advancing issues were up 67% versus 31% for decliners today, but the big news was 409 new 52 week highs versus 123 new lows. This is the kind of figures we need to see for the rally to continue. Right now though I think it is a bit too late for the present rally.
Market Direction Closing For Sep 16 2013
The S&P 500 closed at 1,697.60 up 9.61. The Dow closed at 15,494.78 up 118.72. The NASDAQ closed at 3,717.85 down 4.34.
Market Direction Technical Indicators At The Close of Sep 16 2013
Let’s review the market direction technical indicators at the close of Sep 16 2013 on the S&P 500 and view the market direction outlook for Sept 17 2013.
For Momentum I am using the 10 period. Momentum is positive and climbing slightly.
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 Sep 9 which was confirmed on Sep 10. MACD continued to climb today.
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 very overbought.
Rate Of Change is set for a 21 period. The rate of change is now positive and climbing which indicates new buyers are stepping into the rally.
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. It is extremely overbought. As the slow stochastic is looking out more than a day we could see some weakness by Tuesday or Wednesday. It could also be signaling some investor concern over the Fed announcement tomorrow.
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 extremely overbought and the signal tonight is neutral rather than up or down.
Market Direction Outlook And Strategy for Sept 17 2013
I still believe the rally is overstretched here and will pull back. It may try to close slightly up for the day but it will take a positive Fed announcement to get the rally to continue another day. The market direction technical indicators are pointing to a very overbought market.
If the market direction continues higher, the VIX Index calls will be my next choice if the VIX Index falls below $13.50. I don’t think this will happen tomorrow though as I do believe the Fed will want to start scaling back Quantitative Easing and that should stall the rally here.
For Tuesday then I think the rally will stall out and weakness should enter the day. The only thing that should turn the market direction still higher would be a clear signal from the Fed that they are delaying further a scaling back of Quantitative Easing.
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