Yesterday it was about the Federal Reserve and Quantitative Easing tapering. The Dow sold off for the biggest drop since September 2013. Today it’s all about a rebound from overselling and some decent earnings from JP Morgan, Wells Fargo and turns out Christmas Retails sales were actually up for the season. Surprise, surprise. Every year we hear how horrible the earnings will be from the Christmas period and every year analysts act so surprised when they actually show that consumers were out, consuming.
Was The Drop Enough?
For a lot of analysts, yesterday they were bears. Today many analysts are back to being bulls after the drop yesterday. Most felt that was the final drop and stocks will move higher from here. But was it enough of a drop? Now you know why I stay with my strategy of selling puts against large cap stocks for profits and income. I don’t see how yesterday’s plunge “ended” the selling. It was a steep sell-off but I doubt it shook out all the investors who have been silently unloading shares since the start of the year. I find that hard to believe.
S&P 500 Market Direction Chart to Jan 14 2014
The market direction chart still looks like the S&P is having trouble breaking through 1840. That level has been resistance all month. But the longer-term moving averages are looking fine. In fact the 50 day moving average is moving above 1800. Meanwhile the Momentum indicator is almost back to positive on today’s push back by investors. Normally in a bounce back momentum moves up slightly, but it rarely breaks into new ground. Instead today’s buying by investors is moving momentum a lot higher and if this was just a bounce back, that would not happen.
MACD meanwhile continues to move lower. The intraday signal of negative 1.71 is lower than yesterday’s close and is still advising that there is more selling ahead.
IWM ETF Market Direction Indicator
Often the IWM ETF is a great indicator of where the underlying current of the market is. You can see that back at the end of December it set a new all-time high of $115.97. Since then IWM has been soft but certainly has refused to give up trying to break through. Once again today the ETF is within striking distance of the previous all-time high. MACD for the IWM is hardly negative at all with a reading of just negative .09. Momentum dropped yesterday but today it is back almost ready to turn positive.
Intraday Outlook Into The Close
It’s somewhat of a coin toss into the close. IWM continues to show that the majority of investors are bullish. Yet there is a large degree of selling happening every single day as investors take every little push higher as an opportunity to unload more shares. The Fed comments are not helping any, but overall it is the nervousness of investors in general that are holding the market back. The IWM ETF is advising us that there is a lot of strength still behind this market. Any catalyst with sufficient strength to the upside is all stocks need to push the indexes through the most recent new highs.
I am sure we will see a positive close. The most important aspect will be the final half hour. Either the market will push higher drawing in more investors, or investors will sell the last half hour. That’s what I will be watching into the close and what I will be writing about tonight as I believe it will tell investors which way stocks will move next.
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