The Market Direction outlook for Wednesday was for the rally to be attempted once again. Tuesday, the market was definitely ready to rally but the Syrian crisis took centre stage and investors pulled back. Today investors tossed aside their worries and instead concentrated on data that showed the US economy is doing “okay”. That coupled with the belief from Washington that the Syrian response will be limited in scope and not include ground forces embolden investors. They jumped in and bought a variety of stocks that have been beaten down over the past four weeks. It’s important though to remember that this has been a shallow correction. There are still lots of problems ahead and September is definitely not the kindest month in the year for stocks.
Market Direction Pushed By Stats
Lots of stats today that helped push investors to buy and shove the market direction back up. The trade deficit was slightly wider than expected at 39.1 billion as exports dipped and imports rose. The rise in imports economists pointed to as a slightly firmer domestic demand by consumers. Strange how different the stats can be especially when it comes to consumers. Just a few weeks back consumer confidence was at a high not recorded in 5 years but then stats seem to point to consumers spending less. Now we see imports rising. This is why it is hard to read a lot into all the statistics doled out.
Auto sales came in strongly and stock prices in autos moved higher. I had a lot of questions today about Put Selling Ford Stock and personally I don’t see the attraction. Here is the article I posted. The Fed expressed the following in the so-called beige book today reporting that the economy expanded at a “modest to moderate” pace in most of the country in between July and August which if anything points to a scaling back of Quantitative Easing earlier rather than later. Just my opinion of course.
ABX Stock
Meanwhile gold was all over the map today but at the close it was up $3.60 to $1393.50 but still below the supposed magic number of $1400. The price of ABX Stock traded in a very tight range until the last 30 minutes which saw large volume and a spike up and then lots of selling in the last 5 minutes to have the stock end up down 10 cents. Personally I think the stock is looking better here but it’s always tough to call a stock that is commodity based. If gold tanks so will ABX Stock. Still though if I had to be Put Selling the stock I would be doing the $15 for less than 1%. I like to play it safe with ABX Stock. On the call side right now I think the stock looks too strong for selling naked calls. I would be holding off on naked calls or even call credit spreads until the stock looks weaker. Again, just an opinion.
Apple Stock
Lots of big announcements in the tech sector. Microsoft down, Intel Stock up big, Cisco up not quite so big and Apple Stock I actually was a bit disappointed in. Lots of news from Apple stock. Everything from cheaper phones for China to buying back older phones (did Ford try this with the Model T?), and lots of twittering by Icahn and yet the Apple Stock continues to have trouble with the $500 level. One thing though is that it keeps holding it so if a base can be built and enough sellers get out the stock is bound to move higher. Lots of recommendations on Apple Stock calling for it to reach $777 by one analyst (why $777 – why not $792?) and another saying it is so overvalued and the buy back of old phone will hurt the bottom line that the stock will be back to $300.00. My opinion is the stock will trade sideways with the bias up until the market direction turns decisively lower. Not a shallow correction lower, but decisively lower. Then Apple Stock may pull back hard. It will depend on revenue and their revenue numbers have not been astounding.
Market Direction Action For Sep 4 2013
Today rally was overdue. I wrote before how the S&P 500 needs to break through 1650 and then hold it. From there is needs to recover the 1670. Here are my comments again from last night. All the support levels in this market continue to remain unchanged.
A: 1680 marks the top end. If the S&P 500 can climb and stay above this then look for a decent rally. I have my doubts that this can happen but it certainly is not out of the question.
B. 1650 is paramount and places the S&P 500 back to within reach of the 50 day simple moving average (SMA). Obviously the market direction must recover this point. Yesterday’s big opening jump shot the S&P 500 to just above 1650 but then the mood altered and the opportunity was lost. Today it was captured and held.
C. 1620 at the lower end is continuing to hold this market up.
D. 1600 is the last level of support left from the latest rally. When it breaks, which I think the market direction will easily do if it breaks 1620, then the market direction will definitely test the 200 day exponential moving average (EMA).
Next up then the market direction must continue higher and take out 1670 to bring more investors in. Otherwise we are looking at a short little rally with traders buying and selling shares for small gains.
Advance Declines For Sep 4 2013
Advancing issues far outpaced declines with 69% of stocks rising versus 29% falling and 3% unchanged. New highs was up but still nothing like when a market is really pushing higher. New highs were 86 and new lows still outdistanced highs with 118 new lows. Keep an eye on the new lows. The market direction up needs more new highs than lows to really put in a decent rally.
Market Direction Closing For Sep 4 2013
The S&P 500 closed at 1,653.08 up 13.31 and above 1650. The Dow closed at 14,930.87 up 96.91 but still below 15000. The NASDAQ closed at 3,649.04 up 36.43.
Market Direction Technical Indicators At The Close of Sep 4 2013
Let’s review the market direction technical indicators at the close of Sep 4 2013 on the S&P 500 and view the market direction outlook for Sept 5 2013.
For Momentum I am using the 10 period. Momentum is now sitting right at the break point. More neutral than anything but the bias is positive.
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 sell signal on July 31 which was confirmed August 7. MACD is higher yet again today and took a big jump up with a negative reading of just 2.20. It won’t take much to move this into a buy signal if the market direction can keep moving higher.
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 no longer oversold and is about to turn positive which is a good sign for more upside.
Rate Of Change is set for a 21 period. The rate of change is negative but took a big move up indicating that a lot of investors were busy buying positions.
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 up. It is now just oversold.
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 indicating that the market direction is up and it too is just oversold.
Market Direction Outlook And Strategy for Sept 5 2013
Today was a big up day and the Market Direction Technical Analysis indicates that. We could see some consolidation tomorrow but I am thinking more upside at the start then some weakness early or mid-morning and then an attempt to close slightly higher toward the end of the day.
1650 was an important barrier and the S&P 500 closed above it. Now it cannot dally here for more than a day or two. Otherwise the rally will start to weaken. Instead the S&P 500 needs to consolidate and then push higher. It may not take time to even consolidate but if the market does not consolidate then it will be tougher to crack through 1670 which is the next obstacle to recover.
By now regular readers of Fullyinformed.com must see why I love combining stock with options when it comes to trading. Throughout this ongoing correction I have continued to earn very good profits and had to roll down only a handful of positions all of which were done for profits, even if some were small. No one can look out more than a couple of days to determine market direction. There are far too many factors and events that influence stocks. Once you understand this you can begin to see the fallacy of buying and hoping everything works out. Instead by taking small profits continuously a portfolio is compounded monthly, quarterly, semi-annually and annually. The strength in investing is setting aside all the media gossip, rumors and doom and gloom predictions and concentrate on learning how to invest in any market. This little correction has lasted more than a month and yet through applying strategies and being mindful of support levels, I have continued to stay invested, earn income and grow my portfolio. I remain mindful of the market direction, up, down and sideways and I adjust accordingly. That’s what makes using options and stock strategies so powerful.
Tomorrow then I am expecting a green day at the end of it all. If the market slips below 1650 then the rally isn’t over, but it will be tough to convince investors that this rally has legs. Over the next few days then we will get to see if this market direction up has any legs.
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