The market direction outlook for Monday was primarily for stocks to continue their lackluster direction but push higher into the open. The day started off well, but once again a Fed official spooked investors with his comments on tapering sooner rather than later. This sent stocks spinning lower. The S&P easily fell through the 1840 level and then commenced to fall 1.25% by the close.
Meanwhile the government recorded a record budget surplus of $53 billion in December which brought down the government’s deficit 41% in the first quarter. As well for the first quarter revenue rose 8% and spending fell 8%. All of this continues to support the chance the Federal Reserve will taper “sooner rather than later” and more.
Market Direction S&P 500 Intraday For Jan 13 2014
The market opened flat and pushed sideways which is what I had expected. It continued to hold the 1840 level into the lunch hour. Then a rotary speech by Atlanta Fed President Dennis Lockhart sent the markets lower. Right into the close the market direction pushed lower with just a very feeble attempt at a rally into the last few minutes of the day. Investors are getting the distinct impression that the Fed is trying to present a warning to investors to try to keep the market from being shocked over perhaps faster withdrawal from the markets than investors would have liked or anticipated. That certainly would seem to be the case.
Advance Declines For Jan 13 2014
The advance decline ratios reversed entirely for today with only 25% of stocks advancing and 73% declining. There were still double new highs than lows with 162 new highs versus 81 new lows.
Market Direction Closings For Jan 13 2014
The S&P closed at 1819.20 down 23.17. The Dow closed at 16,257.94 down 179.11. The NASDAQ closed at 4113.30 down 61.36.
The IWM ETF closed at $113.94 down $1.58 and once again pushed lower away from breaking the all-time high of 115.97. This is a repeat story for the IWM ETF and is perhaps a signal that the market will move lower before attempting to push higher.
Market Direction Technical Indicators At The Close of Jan 13 2014
Let’s review the market direction technical indicators at the close of Jan 13 2014 on the S&P 500 and view the market direction outlook for Jan 14 2014.
The most important support line in the S&P 500 is still at 1750. That support line is holding the market direction up at present and that has not changed. The second support level of 1780 is light support followed by third band of even lighter support at 1800. Market direction fell back once again from the 1840 level. This cannot keep repeating. The market will I believe now fall to test the 50 day simple moving average (SMA).
For Momentum I am using the 10 period. Momentum has been the best indicator over the past two months, replacing MACD as the most accurate indicator. Momentum is now negative confirming the trend MACD signaled earlier.
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 Jan 8 2014 which was confirmed on Jan 9. That signal continues to point to stocks moving lower.
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 only slightly positive after moving lower today.
Rate Of Change is set for a 21 period. The Rate Of Change is positive for the 16th day but turned lower today.
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 now pointing to the market direction as down.
Market Direction Outlook And Strategy for Jan 14 2014
It would appear that the Fed is trying to get the message out that tapering is for real and will increase faster than most investors had expected. The years of liquidity look ready to be withdrawn and the market will have to stand on revenue alone. That may not be enough.
For Tuesday the overwhelming outlook by the technical indicators is 4 down to 2 up. The market direction will finally pull back unless some new catalyst can turn stocks around. I doubt that will happen immediately so I am expecting stocks will move sideways and lower from here. For now it looks like a top could be in place for stocks and we are going to trail sideways with a bias down one day and then up the next. That type of seesaw market normally keeps volatility uVIX Index
Indeed the VIX Index at one point was up 10% today and closed up 9.39%. My strategy is still unchanged. I am selling small quantities of puts against stocks I would own if assigned. That said, those stocks are large cap blue chip stocks which I think mightoffer better protection in 2014. For Tuesday everything points to lower prices.
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)
Market Direction External Links
Market Direction IWM ETF Russell 2000 Fund Info
Market Direction SPY ETF 500 Fund Info