Market direction tried to push up early in the morning but instead moved sideways and then fell lower in the late morning. By the afternoon market direction fell apart. The weakness in the market direction is not unexpected. Yesterday’s movement higher was obviously technical in nature as investor’s hoped the Fed will maintain quantitative easing into the end of the year at the least. Meanwhile the Commerce Department reported that the US trade deficit widened 8.5 percent to $40.3 billion in April which was indicative of the European recession and slower Asian economies. Most investors though will be waiting for the May unemployment report for non-farm payrolls on Friday.
Market Direction for June 4 2013
Today the S&P 500 exhibited the usual pattern of lower highs and lower lows including the last run-up of the day when the S&P 500 still was unable to break higher. The close at the end of the day was bearish but managed to set a higher low which could see an attempt to move higher at the open on Wednesday.
Market Direction Moving Averages
Today markets the third day that the S&P 500 has closed at the 20 period exponential moving average (EMA). This kind of weakness will not last much longer before the S&P 500 moves lower. It should be remembered though that we are not in a recession and this is nothing more than a pull back instigated by the remarks last week of Fed Chairman Bernanke.
Market Direction Closing For June 4 2013
The S&P 500 closed at 1,631.38 down 9.04 points. The Dow closed at 15,177.54 down 76.49 points. The NASDAQ closed at 3,445.26 down 20.11 points.
Market Direction Technical Indicators At The Close of June 4 2013
Let’s take a moment now and review the market direction technical indicators at the close of June 4 2013 on the S&P 500 and view the market direction outlook for June 5 2013.
For Momentum I am using the 10 period. Yesterday momentum was falling despite the rally back, a sure sign of a weak market. Today momentum continued to fall further.
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 May 24. The sell signal is still valid and the MACD reading is lower, signaling that there is further downside action ahead.
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 negative and signaling further downside is ahead.
Rate Of Change is set for a 21 period. The rate of change is positive but is sliding lower.
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 lower.
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 signaling the market direction is lower.
Market Direction Outlook And Strategy for June 5 2013
Monday’s bounce back was lost today although the market direction managed to close off the lows. The Market Direction Technical Indicators are all pointing to lower prices but the market direction is now oversold and while not oversold to the extreme, we could see a rally attempt to start off Wednesday but I am expecting prices to continue lower.
My strategy for Put Selling in this environment is to take smaller positions against stocks and to stay with Spy Put Options and the IWM ETF trade strategies to trade the downside to keep building up my cash portions.
For Wednesday then I am expecting a rally attempt to start off the morning and then a weaker afternoon. At this point the 20 period moving average is the key to be watched for further deterioration.
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