Today saw the market direction bounce back from the recent selling. As explained in my market direction outlook from the past weekend, this market direction bounce back was to be expected but it does not change the overall direction at this point. Instead, today’s market direction rebound was based on a quick turnaround by investors on the Fed as they felt a poor manufacturing number would keep the Fed involved in the quantitative easing program which the Fed Chairman recently hinted would be scaled back sooner rather than later.
Market Direction for June 3 2013
While I understand that many investors hold little trust in technical analysis of market direction, it is interesting how often technical analysis is proven right.
Today the S&P 500 tried to recover from Friday’s selling and closed right at the 20 period moving average. You can see in the chart below that the S&P 500 has been flirting with the 20 period. Once that technical moving average breaks to the downside the S&P 500 should easily fall to the 50 period which is the yellow line in the chart below. The 20 period is important as it marks short-term support in stocks.
Market Direction Closing For June 3 2013
The S&P 500 closed at 1,640.42 up 9.68 points. The Dow closed at 15,254.03 up 138.46 points. The NASDAQ closed at 3,465.37 up 9.45 points.
Market Direction Technical Indicators At The Close of June 3 2013
Let’s take a moment now and review the market direction technical indicators at the close of June 3 2013 on the S&P 500 and view the market direction outlook for June 4 2013.
For Momentum I am using the 10 period. Despite today’s rally back momentum is continuing to fall.
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 today and despite the rally back, MACD is reading lower, signaling that the downside action from last week still has further to fall..
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 4 2013
The bounce back today is to be expected and this was mentioned on the weekend. The real question before the markets is what will be the driving force behind a rally to new heights for the indexes? Since there is little at this point that can drive stocks higher, the real move in stocks will probably be lower.
The Market Direction Technical Analysis indicators are all pointing to lower prices this week. I am holding off on further Put Selling as I do believe we will see lower prices shortly.
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