My market direction outlook for Friday was up but weak. The day opened with a bounce but then went flat and stayed sideways. It exhibited all the signs the market direction technical indicators had pointed to for Friday. But shortly at 2:00 PM the market direction lifted and ran higher into the close. In fact many stocks that were down slightly or moving sideways picked up steam and pushed up. The S&P 500 moved up 17 points or just over 1%. Friday saw the release of the leading economic indicators which gained 0.6 percent in April which was above economic forecasts and the opposite of March which saw a decline of 0.2 percent. The board indicated that the index is 3.5 percent high at an annual rate than 6 months ago which indicates economic expansion despite a cut in federal spending. Then the consumer sentiment from the University of Michigan came in at 83.7 which was a huge jump from the last reported 76.4 reading.
Interestingly gold continued its decline dropping $27.70 to $1359.20 marking a further 5% decline this week. Gold is looking more and more like it is signaling that the economies of not just North America are improving but much of the global community. The fear factor of the Fed slowing their quantitative easing this year rather than next seems to be ignored by the markets at this point.
Market Direction Action – May 17 2013
The 1 minute chart below shows today’s market direction action on the S&P 500. The market direction opened higher on the economic news and the by 10:00 was turning sideways. You can see this at point A. From 10:30 through to 2:00 PM, point B, the market direction remains sideways and flat. By 2:10 PM though, point C, market d direction changed back to up once the market failed to push lower in the morning and investors were back buying into the close. The S&P 500 closed at the highs for the day.
Market Direction May 17 2013 S&P 1 minute chart
Market Direction Economic News For The Week
This week we have Treasury Bill Auctions on Monday.
April Existing Home Sales on Wednesday around 10:00 AM
Weekly Initial Unemployment Insurance Claims; New Home Sales and Weekly Fed Data on Thursday
Durable Goods Orders on Friday.
Home sales will be important as with durable goods orders. Next week is a short week with the Memorial Holiday on Monday May 27.
Market Direction Closing For May 17 2013
The S&P 500 closed at 1,667.47 up 17 points. The Dow closed at 15,354.40 up 121.18 points. The NASDAQ closed at 3,498.97 up 33.72 points.
Market Direction Technical Indicators At The Close of May 17 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 17 2013 on the S&P 500 and view the market direction outlook for May 20 2013.
For Momentum I am using the 10 period. Momentum is positive and turning sideways.
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 April 26 and the signal remains valid. The signal reading is strong and continues to show there is more upside to this rally.
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 continuing to stay extremely overbought. This is a good sign for the market direction continuing higher. Markets can remain overbought for lengthy periods which continues to add strength to the rally. If as soon as the Ultimate Oscillator signals overbought the market direction turns and falls, it is a sign of weakness in the market direction. that has not been the case.
Rate Of Change is set for a 21 period. Rate Of Change took another jump today which often means a change on Monday.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and 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 also extremely overbought and is signaling the market direction is up. The overbought condition is extreme now with a reading of 100 for the K period. This is rarely followed by another strong up day.
Market Direction Outlook And Strategy for May 20 2013
The market direction technical analysis is still signaling there is room to the upside but for now there remains strong indications that the market direction up is way overbought. The fast stochastic with a reading of K period at 100% is at the ultimate extreme high. This rarely lasts more than a day. The rally remains impressive and I still see nothing to suggest any kind of severe correction is nearing us. Therefore while the market direction is very overbought and while there could be a pull back, the outlook overall remains strongly up.
More than half of all my naked puts expired last Friday leaving me with a lot of capital to place into trades. I will be looking for dips on my favorite stocks to sell puts. Meanwhile for Monday I am expecting some weakness in the morning but once again a push for new highs later in the day. The extreme overbought condition of the market direction could result in a pull back at any time, however any such pull back would be a major buying opportunity at present therefore there may be no pullback of any size to contend this week.
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