I did a lot of trades today in the market direction portfolio and a couple of Trading For Pennies Strategy trades as well. The market direction moved as expected today with a sideways action while stocks consolidate the gains made on Tuesday. It is encouraging to see the indexes hold their present valuations especially after such a huge up day on Tuesday. Normally a strong up day like Tuesday will create such an overbought condition that stocks will move lower the following day as investors take profits. That was not the case today. As well the ADP numbers although somewhat disappointing did point to continued growth in employment even if not at the level to really get the economy humming.. The last thing the market direction up needs is any kind of surprise to the employment numbers and Friday we get the February numbers.
S&P Market Direction Intraday for March 5 2014
The one minute S&P chart below is quite different from yesterday. On Tuesday the market direction shot up and then stayed almost completely sideways for 90% of the day. Today the market action was choppy but there were some significant events. The first was the drop in the morning down to 1871.11 which ended up being the low for the day. In the late afternoon around 3:00 PM selling pushed the market direction back to 1871.55 but the market held above 1871 which is a good sign for more advances this week. The majority of the day the 1872.50 level was the prime support point for the market and a number of times the S&P pushed above 1875 and then tried to push beyond 1876. Investors were anxious today to push the index higher but the overbought condition has brought out sellers who are using the spikes higher, to unload some of their positions and readjust for another move higher later this week and into next. Overall though investors are seeking higher valuations for stocks.
Advance Declines For March 5 2014
The advance – decline numbers today show how choppy the action was with 55% of stocks advancing and 44% declining. There were just 105 new highs which was a lot fewer than yesterday’s 307 new highs, but there were only 52 new lows which is far less than most numbers we have seen all of this year. These numbers are bullish for further advances.
Market Direction Closings For March 5 2014
The S&P closed at 1873.81 almost unchanged and down just 0.10. The Dow closed at 16,360.10 down 35.10. The NASDAQ closed at 4357.97 up 6.00 on the day.
The Russell 2000 ETF IWM was almost unchanged closing down just 0.07 at $119.76. All the indexes showed strength today and managed to hold their gains from Tuesday. This is a good sign for the markets.
Market Direction Technical Indicators At The Close of March 5 2014
Let’s review the market direction technical indicators at the close of March 5 2014 on the S&P 500 and view the market direction outlook for March 6 2014.
The 1750 level is holding the S&P up. The past several days has seen support building at the 1840 level. Today we saw the 1871 level hold recent gains. This is the second test of the 1871 level. This bodes well for the 1840 level. The longer the market stays above 1871, the stronger support will be at 1840 if the S&P moves back lower.
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 for the second day is climbing.
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 Feb 11. MACD moved back up a bit higher today. While not significant in its rise today, the fact that it is moving back up is still good news for the market direction to continue 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 positive and moving further into overbought territory.
Rate Of Change is set for a 21 period. The rate of change jumped dramatically yesterday and I indicated I had expected the Rate Of Change would pull back today. This is what happened but the outlook is still quite positive from the Rate Of Change.
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 back to up for Thursday. Yesterday it was pointing to weakness which is what we did see for the S&P. Now the Slow Stochastic although still very overbought, is signaling higher prices are ahead for stocks.
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 further gains tomorrow for stocks. It is extremely overbought.
Market Direction Outlook And Strategy for March 6 2014
With the Ukraine out of the spotlight the market direction today held its ground. Investors were busy readjusting positions as they took some profits from Tuesday’s massive run-up. At the close today the market direction technical indicators are pointing to more gains ahead for stocks. There will be more consolidating, which could even result in some weakness but the trend is up unless the Ukrainian Crisis should take a turn for the worse.
With support continuing to build at the 1840 level, stocks have a good chance to push beyond 1880 in coming days. For Thursday as long as the Weekly Initial Unemployment Insurance Claims stays below 350,000 the outlook should remain positive for stocks.
Momentum is back building to the upside and MACD is once again moving higher. The market direction up is still heavily overbought but markets can continue to climb even when very overbought. I am expecting tomorrow to be choppy again but the bias is for stocks to not give back their gains but to consolidate and move up. All the indications are that the markets will see a positive close tomorrow.
I will be trading the dips again tomorrow in the market both in the market direction portfolio as well as the big cap stocks I follow. At present, trading against the dips is the best way to trade the overbought conditions the market direction up is facing.
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