Yesterday Fed comments from Charles Evans out of Chicago dropped the market direction back from its highs as he spoke of a possible early end to the bond buying program. Today Fed comments by James Bullard of St Louis that the bond buying program should be continued to boost the economy further, pushed up the market direction. Tomorrow the Fed chairman speaks out and the market direction pulled back into the close as investors await Bernanke’s testimony tomorrow.
Meanwhile Goldman Sachs increased their forecast for the S&P 500 today to 1750 for 2013 and 1900 for 2014. All of this weighed on investors today as we look at the S&P 500 market direction action for May 21 2013.
S&P 500 Market Direction Action for May 21 2013
The S&P 500 chart is below and at the open the markets moved higher. The most interesting part of today’s chart is the early morning rally pullback ended up being near the day’s closing. (Point A to Point B). The early morning sell-off in the market direction was slight and then tthe S&P 500 moved higher reaching another new all time intraday high before pulling back to close just below 1670. There is nothing in this chart that signals concern.
Market Direction Economic News For The Week
On Wednesday we have Fed Chairman Ben Bernanke’s report.
April Existing Home Sales on Wednesday around 10:00 AM
Weekly Initial Unemployment Insurance Claims; New Home Sales and Weekly Fed Data on Thursday
Durable Goods Orders on Friday.
Home sales will be important as with durable goods orders. Next week is a short week with the Memorial Holiday on Monday May 27.
Market Direction Closing For May 21 2013
The S&P 500 closed at 1,669.16 up just 2.87 points and just shy of 1670. The Dow closed at 15,387.58 up 52.30 points. The NASDAQ closed at 3,502.12 up 5.69 points.
Market Direction Technical Indicators At The Close of May 21 2013
Let’s take a moment now and review the market direction technical indicators at the close of May 21 2013 on the S&P 500 and view the market direction outlook for May 22 2013.
For Momentum I am using the 10 period. Momentum is positive but again moving sideways today for the third day.
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 April 26 and the signal remains valid. The signal reading is strong and continues to show there is more upside to this rally but the divergence has slowly been eroding just slightly over a period of more than a few days. This might mean nothing or it could be the start of a sideways move in the market direction for a few days.
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 continuing to stay overbought but it is beginning to pull back from extreme overbought readings.
Rate Of Change is set for a 21 period. The rate of change is starting to fall which is not concerning at this point but could signal a movement more sideways than up.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is extremely overbought and it signaling that the market direction is back to 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 extremely overbought and is signaling the market direction is down.
Market Direction Outlook And Strategy for May 22 2013
Tuesday’s have been very strong during 2013. It is amazing that 19 Tuesday’s so far this year have produced positive returns for the market. Wednesday’s on the other hand are mixed.
Bernanke’s testimony I believe will be much of the same but even a hint of a possible early end to the bond buying program could pull the market lower. Aside from his comments only something unexpected and strongly negative could hurt this market.
My market direction outlook remains pretty well unchanged. The market direction up is very overbought but as you can see from the market direction technical indicators above, the overbought readings are starting to be worked out of the market. The Ultimate Oscillator is beginning to pull back from extreme overbought readings. The Slow Stochastic and Fast Stochastic are both a bit lower and even the rate of change is lower.
The Fast Stochastic is signaling that tomorrow (Wednesday) could see a lower market for much of the day. I tend to agree, but the market direction remains solidly higher and only a change in stance by the Fed Chairman Bernanke can make a significant change to the market direction at this point and I doubt that will occur tomorrow.
Wednesday then look for the market direction to remain weak but trying to push higher.
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