The market direction outlook for Friday was for stocks to trade sideways with the bias down. According to many analysts, the down day on Friday was caused by concern over the Ukraine. I am not so sure. By viewing the NASDAQ and then the S&P it looks more like investors are dumping anything with any degree of risk and moving into big cap dividend paying stocks. Often this type of move indicates the beginning of a correction that will be longer than a short shallow dip. Let’s take a look at the SPX for April 25 to start.
Market Direction S&P Intraday Chart April 25 2014
The one minute chart below for April 25 2014 shows the weakness remained throughout the day. The morning saw stocks drop at the open, try to rally back but by 11:00 AM stocks were sitting around 1861.53. At that point the best rally of the day occurred and stocks climbed back but again failed to break the earning morning high. Note how the 11:00 AM trade remains intact still after many days of trading the Spy Put Options or the Trading For Pennies Strategy. It is interesting how often this time period has resulted in profits over the last few weeks now.
By the afternoon the market direction was sliding lower again as it set up a pattern of lower highs which lasted into the close.
Advance Declines For April 25 2014
Stocks on Friday turned negative with 64% declining and 33% advancing. New highs were just 82 and new lows 79. The number of new highs has been poor for much of the rally back from the recent correction. This is often a sign of a weak rally and a signal that the recovery is not much more than a rally. The problem with the present rally is, that it pushed higher than a normal rally does before turning back down. This made the rally difficult to judge as to the extent of how high the rally could go. On Friday we got the answer. The rally looks to be ending.
Market Direction Closings For April 25 2014
The S&P closed at 1863.40 down 15.21. The Dow closed at 16,361.46 down 140.19. The NASDAQ closed at 4075.56 down 72.78 for the worst performance among the indexes and ending below the 100 day EMA again.
The Russell 2000 ETF IWM fell $2.00 to close at 111.61. The collapse on Friday was 1.76% as the small caps continue to be pounded lower.
Market Direction Technical Indicators At The Close of April 25 2014
Let’s review the market direction technical indicators at the close of April 25 2014 on the S&P 500 and view the market direction outlook for April 28 2014.
The 1750 level continues to hold the S&P up since the correction ended in early February. All the levels of any support above 1800 have been broken and will need time to heal and create support again. Any downturn in stocks will quickly see these levels above 1800 break. The only level above 1800 that has any support worth mentioning is the 1840 level. The push lower on Friday may see a bounce back attempt on Monday but I believe overall the direction is down to 1840 to test the support strength. Overall I think the market will be falling to 1750 over the coming weeks.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past four months, replacing MACD as the most accurate indicator. Momentum is still positive but is falling quickly now and is about to turn negative.
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 22 and on Friday MACD was still positive but the up signal is half what it was on Thursday, reflecting the sell-off on Friday.
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 fall and is nearing negative readings.
Rate Of Change is set for a 21 period. The rate of change is still providing a positive reading but is turning lower.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction down for the start of the final week of April.
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 continues to also signal another down day for Monday and the sell signal is strong.
Market Direction Outlook And Strategy for April 28 2014
The technical indicators are pointing to further weakness on Monday. We may see a bounce back attempt at the outset and it could be strong but I will be looking at any bounce back as a signal to buy positions for profits to the downside. I am traveling on Monday coming back from a wedding and will have some difficulty posting. I will endeavor to keep the postings up to date to review what is happening on Monday.
I am expecting a lower close on Monday and will be trading to the downside with Spy Put Options and keeping the market direction portfolio pointed to the downside.
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