The market direction outlook for Tuesday was for the market to issue a clearer signal as to the direction it was going to be moving for the next while. During the morning the S&P 500 moved lower and broke easily through 1700. It then turned around and commenced to recover. I jumped in and bought UDOW shares for the market direction portfolio as I felt that by the end of the day the S&P 500 would be at least in the green, even if only slightly. In the end my position was stopped out for a small loss. Let’s take a look at today’s somewhat disappointing action.
Market Direction Two Day S&P 500 Chart
The 1 minute chart below is for Monday and Tuesday of this week. You can see where 1700 is. On Monday 1700 broke but only for 30 minutes and the break was shallow. On Tuesday the break was deeper but the recovery reasonably strong and the S&P pushed higher in the afternoon than on Monday. But shortly before 2:00, the top was in and the market plunged lower into the close. For the day the market closed at the lows. Once again the 1700 broke easily.
Advance Declines For Sep 24 2013
The advance decline numbers for today were a repeat of Monday’s only in reverse. 52% of stocks advanced versus 44% that declined. New highs were 173 and new lows 100. Another day of almost equal breadth movement but more new highs than new lows.
Market Direction Closing For Sep 24 2013
The S&P 500 closed at 1,697.42 down 4.42. The Dow closed at 15,334.59 down 66.79. The NASDAQ closed at 3,768.25 up 2.97. IWM was also up just fractionally but it reached $107.42 intraday as it sits near all-time highs for this ETF.
Market Direction Technical Indicators At The Close of Sep 24 2013
Let’s review the market direction technical indicators at the close of Sep 24 2013 on the S&P 500 and view the market direction outlook for Sept 25 2013.
For Momentum I am using the 10 period. Momentum is positive but is continuing to fall rapidly now.
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 is also pulling back and closed positive but with another lower divergence. This one ended the day at 3.18.
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 now negative.
Rate Of Change is set for a 21 period. The rate of change is also continuing to fall but is still 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 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 tomorrow is lower.
Market Direction Outlook And Strategy for Sept 24 2013
The market direction technical indicators are telling me that stocks are going to move lower. Still though my instincts tell me stocks may not fall very far. The IWM and NASDAQ continue to cling to positive readings and the Dow Transports is also climbing.
Still though part of the reason why I was burned today in my market direction trade is because I went with instinct on the market direction trade rather than the market direction technical indicators which were pointing to a down day for Tuesday.
For Wednesday then, the S&P 500 has broken 1700 and I will at some point tomorrow be buying Spy Put Options and DXD ETF shares. However I will be using a very tight stop for the market direction portfolio and I will most likely sell any Spy Put Options I buy during the day tomorrow. There are enough signs suggesting the market direction is on the verge of moving lower, that they must be observed, but instincts tell me that there may not be a lot of downside but more a shallow pull back.
For tomorrow then I am looking for stocks to end a bit lower but remember, after 4 days of selling, the market direction may shift back to up.
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