In my market direction outlook for Friday I had commented that if the employment numbers were better than expected on Friday, the market direction would surprise to the upside. The news that 165,000 jobs were added in April along with an adjusted rise for February and March seemed to be the numbers a lot of investors were looking for. It was not the long ago that 165,000 jobs would have seemed poor, but the number of jobs being created is rarely above 200,000 any more, so obviously investors seemed to take the fact that the number wasn’t poorer as good news after all. Friday’s numbers moved the unemployment rate to 7.5 percent which is a 4 year low.
The Dow added 142.38 points and intraday moved above 15000 for the first time. The S&P 500 meanwhile closed above 1600 for the first time in its history. While the past weekend there were many articles arguing both bull and bear sides to this latest “round number”, a lot of investors seemed to have forgotten that the move from 14000 to 15000 marks a gain of just 7 percent for the index.
Market Direction The Numbers Game
As the Dow climbs higher the numbers are always impressive but the time periods over the last 13 years has not been. While analysts love to talk up the numbers and they were certainly talking a storm on Friday with the Dow up over 15,000 intraday, the numbers game is worth looking at.
In 1966 the Dow had flirted with 1000 but in 1972 the Dow closed above 1000 for the first time. 15 years later it had reached 2000 in 1987.
From that January it took just 13 years for the Dow Index to grow to 11,750 by January 2000 before collapsing into what turned out to be a 3 year bear market.
From January 2000 it was 7.5 years later that the Dow finally reached 14000 in July 2007. This latest move to 15000 then, while certainly impressive in its round number, has taken 5 years. Therefore while the numbers are impressive the actual returns over the last 13 years has not been. It is important then for investors to consider the past growth of the Dow and to keep these numbers in perspective.
Market Direction Closing For May 3 2013
The S&P 500 closed at 1,614.42 up 16.83 points. The Dow closed at 14,973.96 up 142.38 points. The NASDAQ closed at 3378.63 up 38.01 points.
Market Direction Technical Indicators At The Close of May 3 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 3 2013 on the S&P 500 and view the market direction outlook for May 6 2013.
For Momentum I am using the 10 period. Momentum is continuing to climbing although slowly..
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 is now moving higher another good signal for market direction up.
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 overbought and up slightly from Thursday.
Rate Of Change is set for a 21 period. Rate Of Change is continuing to climb indicating more investors are buying as the market direction continues to move higher.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and indicating that the market direction by mid-week could be neutral to down. This reflects the extreme overbought condition of the market direction up.
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 but it indicates that the market direction will be higher on Monday but just slightly.
Market Direction Outlook And Strategy for May 6 2013
The outlook for Friday had been a solid move higher if the employments numbers were decent. I don’t know if 165,000 is a great number but it was better than expected and the market direction reacted accordingly.
For Monday then the market direction technical indicators are in general pointing to a higher market. The extremely overbought condition may keep a lid on the market direction on Monday but overall only one indicators is showing weakness and it is the Slow Stochastic. This indicator is looking out further than 1 or 2 days so by mid-week we may see some sideways to down action but for Monday the market direction may start off weak but should continue to push higher as the day progresses.
My strategy is exactly the same as before although I am continuing to use more capital as I see little at this time that points to any kind of severe correction. This is May however so it bears watching for any sign of a serious weakness that could surprise to the downside. For now though Monday looks good and I will be watching for possible opportunities should any of the stocks on my watch list pull back.
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