The market direction outlook for Friday was for the market direction to continue higher. With the uptrend still intact and a shortened day the trend is almost always carried forward from the previous day.
Instead what we saw was a push higher in all three indexes and then light but very steady selling into the close which pushed both the S&P 500 and the Dow into negative closes. The NASDAQ on the other hand, stayed solid and closed at another new 13 year high.
Why The Sell-Off On Friday
Short days with very light volume normally can see wide swings. It is easy with limited volume to push stocks around and even the indexes themselves. Friday saw low volumes and with December right around the corner, many investors decided to take some profits, especially with stocks pushing into new highs again earlier in the morning.
I wrote about the year-end window dressing and you can be sure that many fund managers and larger institutional traders are unloading some of their positions and taking profits after the very nice run-up in stocks. As explained in my article on window-dressing, many fund managers will be boosting their annual returns after having missed a lot of this year’s rally. With many of them having done that, the selling of stocks into the close on up days, serves their needs perfectly.
Selling Into The Close 5 Day 5 minute chart
If we look at the past five days the market direction higher has been perfect for fund managers to unload shares. Of the last 5 trading days, you can see that there has been selling into the close. This works extremely well as the market direction continues to push back up despite their unloading of shares. This is a common tactic which fund managers have perfected and it is something to be aware of. As long as the market direction continues to hold and move slightly higher, we can expect the selling to continue throughout the week as the fund managers lock in their gains from the last two months and have been able to boost their overall annual returns which was their goal.
Employment Numbers and more
The uncoming week has all kinds of numbers to be watching for. Analysts are expecting the non-farm payroll numbers on Friday to show another increase of about 180,000 jobs and for the unemployment rate to fall to 7.2 percent. Many believe that could be enough to push the Fed to begin tapering in December the $85 billion being used monthly for Quantitative Easing. I doubt that will occur. If anything, I believe it will be the next Fed Chairman’s job to scale back the Quantitative Easing and not Bernanke. This week will also see some early holiday sales numbers from Thanksgiving purchases which many analysts will want to use as a bellwether for holiday shopping numbers. In Canada the Big 6 banks begin reporting on December 3 with Bank of Montreal leading the way. Any strong surprises in these numbers could lead to higher volatility in stocks.
Market Direction S&P 500 Intraday For Nov 29 2013
For Friday, the 1 minute chart below shows all the action. The market opened pushed slightly higher making a new all-time high and then into the close sellers stepped in and pushed stocks lower. Once the morning opening of 1808.66 was broken the selling intensified for a short few minutes and then buyers stepped in and pushed the S&P market direction back up which resulted in a bit more selling and a closing low down at 1805.81, but off the lows for the day.
Advance Declines For Nov 29 2013
Advancing issues outpaced declining issues again today with 53% advancing versus 43% declining and 223 new highs were made versus 75 new lows. The strength is still remaining with the bulls so it still is doubtful we will see any kind of a strong market pull back in the upcoming week unless some of the economic statistics we are expecting fail to come close to estimates.
Market Direction Closing For Nov 29 2013
The S&P 500 closed at 1,805.81 down 1.42 but setting a new all-time intraday high. The Dow closed at 16,086.41 down 10.92. The NASDAQ closed at 4059.89 up 15.14.
The IWM ETF closed at $113.51 up just 0.06 cents after making another new intraday high of 114.16.
Market Direction Technical Indicators At The Close of Nov 29 2013
Let’s review the market direction technical indicators at the close of Nov 28 2013 on the S&P 500 and view the market direction outlook for Dec 2 2013. This was a shortened day at that must be taken into account when reading the technical indicators at the close. Let’s take a look.
The most important support line in the S&P 500 at this time in the ongoing rally remains 1750. That support line is holding the market direction up at present and that has not changed.
For Momentum I am using the 10 period. Momentum is still positive but is down slightly from Wednesday.
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 weak buy signal on Nov 22 and that buy signal was given a very weak confirmation on Nov 25. On Friday MACD was slightly negative but truly more neutral than negative or positive. It shows a market direction that is trending sideways.
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 positive and moved lower on Friday.
Rate Of Change is set for a 21 period. The Rate Of Change is positive but but moved sideways on Friday again indicating a lack of buying interest which is common for a shortened day.
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 after being neutral on Wednesday after the close. It is extremely overbought.
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 is down and it is extremely overbought.
Market Direction Outlook And Strategy for Dec 2 2013
Friday was a shortened day so it is hard to read a lot into the market direction technical indicators. At the close after just 3.5 hours of trading the mood is more down than up or at the least, sideways. The two stochastic indicators are both signaling down. MACD is down although only slightly. Rate of change is flat while the Ultimate Oscillator is positive but fell considerably on Friday’s short session. Momentum remains positive but weaker than earlier last week.
This really is more a sideways trend with a slight bias to be lower on Monday but as it is the start of December, we could see a bit of buying at the open. Investors are primarily optimistic and often the start of a month has been met with buying.
Overall though I am expecting Monday to show a slightly weak day that could end up marginally lower. Still the strength remains with the bulls so any weakness means I will be looking to see which of my stocks has fallen lower and what put premiums I can earn. Anything decent and I will be selling puts.
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