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Market Direction Outlook For June 19 2013 – The Fed Again

Jun 18, 2013 | Stock Market Outlook

The market direction move higher today was stronger than I had anticipated when I indicated in yesterday’s market direction that the direction was more up than down. It was basically all up today but most of it was not so much based on sound economic growth or terrific economic numbers. Instead it was based on a belief that the Fed will remain accommodative still longer with the Quantitative Easing program and indeed there is a lot of evidence that the interest rates being near zero is having a positive effect especially on housing. The housing numbers have been better than expected or anticipated. But perhaps those are the clues investors should be more focused on to determine if the Fed may start scaling back even slightly Quantitative Easing.

I believe any solid evidence that the scaling back will start later this summer could send stocks lower but I am not expecting that from the Fed. There is not a lot else to say this evening about market direction so let’s move right to the market direction technical indicators because it is the Fed news tomorrow that will move the markets and my guess is they will remain fairly accommodative which means more upside for stocks.

Market Direction Closing For June 18 2013

The S&P 500 closed at 1,651.81 up 12.77 or almost the same move up as yesterday. The Dow closed at 15,318.23 up 138.38 points which is higher than yesterday. The NASDAQ closed at 3,482.18 up 30.05 points which is up slightly more than yesterday.

Market Direction Technical Indicators At The Close of June 18 2013

Let’s review the market direction technical indicators at the close of June 18 2013 on the S&P 500 and view the market direction outlook for June 19 2013.

Market Direction Technical Analysis June 18 2013

For Momentum I am using the 10 period. I indicated yesterday that Momentum was ready to turn positive which is what happened today.

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 but the divergence is narrow and preparing to issue a buy signal. Nonetheless the signal still is sell and we will need another strong up day to change it to buy.

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 back positive today.

Rate Of Change is set for a 21 period. The rate of change is negative for the sixth day but is moving higher. The negative reading shows that a lot of investors still do not trust this rally which historically dictates that there is probably more upside than downside ahead.

For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is still signaling that the market direction is up.

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 indicates that the market direction is higher for tomorrow.

Market Direction Outlook And Strategy for June 19 2013

The Market Direction Technical Indicators are almost overwhelming positive for more advances for the market but some of the strength in the up indications is being caused by investors who are convinced the Fed’s talk tomorrow will support stocks. Anything to the contrary could hurt stocks. I cannot imagine the Fed announcing that they will be starting scaling back as early as July but nothing is off the table at this point.

The strategy therefore is unchanged for tomorrow but the entire market direction for Wednesday is in the hands of the Fed.

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