The outlook for Thursday was for stocks to move sideways with a slight bias lower. Instead stocks opened lower and quickly fell on disappointing consumer spending numbers which showed a 0.2 percent increase in consumer spending versus an estimated 0.4 percent. On the plus side incomes rose 0.4 percent in May which was higher than April’s 0.3 percent increase. Meanwhile James Bullard, president of the St. Louis Federal Reserve Bank indicated that interest rates could rise as soon as March.
Market Direction S&P Intraday Chart June 26 2014
The one minute chart below shows today’s rather choppy action. The morning saw an immediate drop but then the rest of the day the S&P spent climbing back above 1956. By the end of the day the SPX was closing near the highs. The strength remains obvious for investors. The morning dip was immediately bought by investors and the close back above 1956 is bullish.
Advance Declines For June 26 2014
The number of stocks making new 52 weeks highs was almost unchanged from yesterday with 145 new highs. New lows cam in at just 12. Volume was lower as the weekend approaches with 2.8 billion shares trading hands. 51% of stocks were climbing and 46% were declining. Once again the numbers continue to support higher valuations for stocks.
Market Direction Closings For June 26 2014
The S&P closed at 1957.22 down 2.31. The Dow closed at 16,846.13 down 21.38. The NASDAQ closed at 4379.05 down just 0.71.
The Russell 2000 IWM ETF closed down .20 cents to $117.55
Market Direction Technical Indicators At The Close of June 26 2014
Let’s review the market direction technical indicators at the close of June 26 2014 on the S&P 500 and view the market direction outlook for June 27 2014.
Stock Chart Comments: The market direction today turned around after falling to just below 1945 and closed once more back above 1956. This remains a pivotal valuation for the S&P. Yesterday’s stock chart comments mentioned that with the SPX closing above 1956, investors might attempt to push stocks higher. This did not happen but the close back at 1956 is bullish.
At 1930 there is really no support yet but this is a chance for the S&P to try to establish some support. Personally I think any pullback will work its way down to 1919 fairly easy. That though is just a prediction which is not based on any technical indications at this time.
Aside from 1930 the support levels are 1919 – which again is light support, 1870 which is strong support, 1840 also strong support. Those two support levels, 1870 and 1840 at present mark important trading levels for investors. Both are now below the 100 day exponential moving average (EMA) so any pullback this summer which breaks 1870 should be used as a signal to commence picking up ultra short ETFs or spy put options 2 months out for a move lower. A break below 1840 at present would challenge the 200 day EMA however at the rate the market is moving higher the 1840 and 1870 will soon be below the 200 day EMA which is sitting around 1820 at present.
I have repeatedly mentioned two other support levels, namely 1775 and 1750. Both are critical support levels. 1775 is important but 1750 is now the bottom line. A break of that would mark a severe correction of 10.5% at present which would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I an anticipating as there are no signs of any impending correction.
My Pullback Outlook: I have been waiting for a pull-back this summer to between 1870 to 1919 but today’s quick recovery from the morning opening low is not a sign of a market ready to move lower..
Momentum: For Momentum I am using the 10 period. Momentum has been the best indicator over the past eight months, replacing MACD as the most accurate indicator. Momentum is positive again today.
MACD Histogram: 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 sell signal on June 24. Today that sell signal remains active although it is very weak and could change positive easily should stocks move higher on Friday.
Ultimate Oscillator: 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 still positive and moving sideways.
Rate of Change: Rate Of Change is set for a 21 period. The rate of change remains positive but moved lower on Thursday.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling market direction is down and it is overbought.
Fast Stochastic: 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 too is overbought.
Market Direction Outlook And Strategy for June 27 2014
Despite the recovery from the early morning drop, the technical indicators are still pointing to further weakness in stocks for Friday. This could indeed be the case as investors prepare for the weekend and a shorter week with Independence Day on Friday July 4.
There is though not a lot of concern among investors and among the VIX Index. At present every dip or selling is met with buyers and stocks continue to show resilience and the ability to climb higher. We will probably see some weakness again for Friday but overall the direction remains higher which we could see as soon as early next week.
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