The market direction outlook for Wednesday was for stocks to be weaker and move lower. The opening certainly was lower but not the close as new highs were reached. Even my intraday market direction outlook was off as I felt there was not enough strength to hold the new highs whereas the market instead not only held the new highs but closed at even higher highs than when I did the intraday market direction outlook. A lot of this comes back to the year-end window dressing I was discussing in my article which you can review here.
If you review my market direction outlooks this week it seems like I am always a day behind. When it looks like the market direction is lower it turns around and pushes back up. When it is higher, it moves back lower. Many fund managers are desperately trying to improve their returns. This year with the S&P up 23% it is a tough number for many to beat, especially when so many were not in the market or left it in August. This continues to keep stocks up as every dip is being bought.
Market Direction Shake-out and Buy-in
This is an old strategy that continues to work well for big money. These fund managers know that investors are nervous at present levels. When some selling starts they join in and dump some of their shares and take profits. But their selling also sparks concern. The talking heads on the media outlets join in and whenever there is a down day they bring out a string of bear commentators. Investors worry and sell shares. You can see higher sell volume days in the chart below. These fund managers step in and pick up the shares having shaken out the other investors. They turn around and push the stock back up and often end up selling the same shares back to the investors who sold their shares at lower prices. There is a lot of truth to the saying “Buy high and sell low” as many investors tend to sell at lower prices and then turn around and buy back in at a higher price.
At the close of today both the Dow and the S&P were at all time highs. Even the NASDAQ ran up 45.66 point to 3,965.58 and it within striking distance again of 4000.
Why The Continued Rise?
Many investors are expecting Janet Yellen to be named the new Federal Reserve Chairman on Thursday. Investors like that she is dovish when it comes to withdrawing stimulus. Many think she will continue the stimulus program into 2014 and do everything to keep interest rates low. This will continue to be good for stocks.
Investors in general now believe there will be no tapering of Quantitative Easing in December which will allow stocks to rally higher into the year end.
In China the Communist party left things pretty much as they are and while many did not like this, for investors it is just another unknown out of the way.
Market Direction S&P 500 Intraday For Nov 13 2013
The intraday chart for Nov 13 below shows the mistake I made. When I wrote my intraday comments I expected the market into the close would pull back after setting another new high around 2:00 PM and close around 1771. Instead the market pushed higher and surpassed the earlier high to closed at 1782.
Advance Declines For Nov 13 2013
Today the reverse to yesterday occurred as advancing issued outpaced declining issues with 66% of all stocks advancing versus 31% declining. This is also exactly the opposite of yesterday. New highs were just 167 and new lows 102.
Market Direction Closing For Nov 13 2013
The S&P 500 closed at 1,782.00 up 14.31. The Dow closed at 15,821.63 up 70.96. The NASDAQ closed at 3,965.58 up 45.66. The IWM ETF closed at $110.52 up $1.05 or 0.96%.
Market Direction Technical Indicators At The Close of Nov 13 2013
Let’s review the market direction technical indicators at the close of Nov 13 2013 on the S&P 500 and view the market direction outlook for Nov 14 2013.
For Momentum I am using the 10 period. Momentum is back positive 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 Nov 7. The reading on Nov 7 was negative 1.02. Yesterday was the first day with a negative reading lower at negative 1.04. But obviously from today’s action this was not a confirmation of the previous reading of Nov 7. Although I indicated that the call yesterday was questionable I still overweighted that signal. This was a mistake on my part as both the Fast Stochastic and Slow Stochastic pointed to the market as being up for Wednesday. I gave too much weight to MACD.
Today’s reading from MACD is still negative 0.51 but it is rising which is all that matters at this point.
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 still positive and now rising.
Rate Of Change is set for a 21 period. The Rate Of Change moved sideways once again today as it signaled little change ahead for tomorrow.
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 up and it is very overbought.
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 that the market direction is up Thursday and with a K% reading of 100, it is extremely overbought.
Market Direction Outlook And Strategy for Nov 14 2013
The market direction technical indicators are such that the market direction bias while still somewhat sideways, is up. The rate of change is flat which is signaling that not a great deal of change is to be expected. MACD is back climbing and obviously the sell signal was not confirmed yesterday. Both stochastic indicators are signaling market up and they are very overbought. Momentum and the Ultimate Oscillator are both rising.
The move is still higher for the S&P 500 for Thursday. The only thing that could throw a curve at investors tomorrow would be something unforeseen with Janet Yellen or the Weekly Initial Unemployment Insurance Claims coming in too high.
For tomorrow then the market direction is sideways with the bias still higher.
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