The market direction outlook for Wednesday was for weakness in stocks and a lower day overall. The market direction fell to 1692 by 10:00 AM and then rallied back. By shortly before noon the market had recovered into positive territory and was pushing just above 1701.
The move higher did not last long and shortly after 12:00 sellers entered and pushed the market direction back to 1692. The rest of the afternoon saw the market direction waffling but in the end it closed just below 1693 at 1692.77.
The most important aspect of today’s market direction action was that the S&P failed to break 1692 which is interesting.
Market Direction Intraday One Minute Chart
You can see all the action in the chart below. 1692 actually has no real support so the fact that it kept falling to 1692 and then immediately investors began to buy again shows that there is still buying interest among investors. An interesting story a few days ago regarding a call by Wells Fargo strategist Gina Martin Adams for the S&P to fall to 1440 by the end of the year with a plunge in stocks happened in October certainly caught the attention of a lot of investors.
The real damage today came from the retail stocks with Walmart Stock trimming inventories, just a couple of days after announcing their outlook for decent Christmas sales and hiring an additional 50,000 employees for the holiday season.
Walmart Stock Hammers Dow Index
In particular Walmart Stock (WMT) hammered the Dow Index as at one point it was down to $73.56 before closing at $74.65 for a decline of 1.45%. Walmart stock saw the biggest volume day since April 2012. The pressure to the downside was huge and almost unrelenting. My favorite put strikes are $72.50 and $70.00.
Unfortunately the $70 put strike which you can see in the chart is a fair way out of the money and has no put premium value to speak of. Today the Oct 19 options expiry, $70 put strike was trading at .22 cents at the height of the selling.
Instead I jumped in and sold 3 of the Oct 19 $72.50 put strike for an terrific $1.95. Unfortunately I got filled on just 3 put contracts. At the close these puts were trading for just .36 cents. I will wait to see what happens tomorrow but I can’t do a lot with just 3 put contracts so I may simply buy and close them. Walmart stock though is worth watching over the next few days for any additional Put Selling opportunities.
Nike Stock Trending Sideways
Nike Stock meanwhile moved lower today as it continues trending more sideways than up or down. Nike Stock will release earnings tomorrow and investors are fairly nervous. Any poor news and I plan to be Put Selling Nike Stock if it falls hard and fast so I will be watching it tomorrow as well as Walmart Stock.
Advance Declines For Sep 25 2013
The advance decline numbers for today were almost equal with 48% advancing versus 49% declining. New highs though continue to outpace new lows with 134 stocks with new highs versus 85 with new lows.
The advance decline numbers are in contrast to the move lower today as they are not in agreement with the move lower but instead are reflecting just a period of shallow weakness rather than any kind of notable correction. Investors trading to the downside need to be careful as these numbers each day do not reflect a market in trouble.
Market Direction Closing For Sep 25 2013
The S&P 500 closed at 1,692.77 down 4.65. The Dow closed at 15,273.26 down 61.33. The NASDAQ closed at 3,761.10 down 7.16. IWM was today down just a fraction with a loss of 0.20. Again another warning sign for those investors trading the market direction to the downside.
Market Direction Technical Indicators At The Close of Sep 25 2013
Let’s review the market direction technical indicators at the close of Sep 25 2013 on the S&P 500 and view the market direction outlook for Sept 26 2013.
For Momentum I am using the 10 period. Momentum is positive but is continuing to fall rapidly now.
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 Sep 9 which was confirmed on Sep 10. MACD is also pulling back and closed positive but with another lower divergence. This one ended the day at 1.80.
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 today’s selling pressure has pushed it into overbought readings.
Rate Of Change is set for a 21 period. The rate of change made a surprise move today as it shot back up indicating investors are in buying stock on this latest weakness. This would account for the S&P not falling below 1692.
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.
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 for tomorrow is lower.
Market Direction Outlook And Strategy for Sept 26 2013
The market direction technical indicators are telling investors that the market is oversold but continuing to be weak. Caution is warranted when placing new trades but investors trading the market direction to the downside should watch for a possible bounce back tomorrow. The Ultimate Oscillator is very oversold which often is a signal for a bounce. Also the rate of change indicates that investors were buying today’s weakness and the market direction could surprise to the upside as the rate of change indicates that a directional change may be in the cards for tomorrow.
Last is IWM which remains very strong, the NASDAQ which also is strong and the advance decline statistics which show no real problem with the market direction at the present time. These signals need to be watched for any change because right now they are telling investors to be careful when betting to the downside.
We have mixed signals at the close of trading on Wednesday and it is important to remember that MACD while declining is still holding a buy signal on the overall market direction. As well today marked the 5th consecutive decline which is a first for this market in 2013. This also signals that a bounce back could be in the works. Tomorrow then could see the market direction attempt a recovery even if it ends up being only a slight one.
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