The market direction outlook for Thursday was for stocks to continue pushing higher. The morning saw a bit of weakness for a very short period but then it was up and higher once again. Any little dip in a worthy stock is being bought and that stock pushed higher. You can tell from the continual movement in many stocks that many fund managers must have missed a lot of the rise in stocks this year. Obviously many felt that stocks would collapse this year. That is not the case and apparently many fund managers are sitting with single digit returns and scrambling to improve their returns for the annual review by their clients. According to an article in Wall Street Journal some hedge funds are up less than 6% for the year. They have a lot of catching up to do.
Keep An Eye On Volume
You can see these “big boys” at work by sheer volume. Stocks like Nucor Stock which I mentioned to FullyInformed members yesterday and which I sold puts on today had volume more than three times the normal just one day after the stock fell back to the Middle Bollinger Band. Basically 3 days of weakness and fund managers are back in again. The stock today closed up 1.36%. Another day like this and a fund manager has earned almost 3% on his invested capital. Not bad for a couple of days work. But when this game is over watch for many of these stocks to revert back to normal trading and in many cases normal valuations.
Market Direction S&P 500 Intraday For Nov 14 2013
Today I have included the 5 minute chart to show a couple of things to be watching for. The morning saw the usual morning weakness. From there the market direction turned higher and by late morning the market direction had already made its high for the day. Note how the rest of the afternoon the market drifted sideways with an up bias but at the close the market direction ended right at that earning morning high.
For trading within the SPY Index and IWM the very early morning has been exceptional for setting up trades using call options. This has been my Trading For Pennies Strategy trade and I have had one spectacular day after another with very few losses primarily because of this movement in the morning. The market sells lower, then when the selling seems to stop the market jumps higher. This is also excellent for spy index call options. The afternoons have been very steady as well for additional smaller trades. When the market direction pulls back after the morning high but fails to fall below the opening high, that’s another entry point that has been very good for trading these two call options. Kit doesn’t work every day but since the start of this rally back in October, it has been an amazing return.
Advance Declines For Nov 14 2013
Today was a repeat of yesterday with advancing issued outpacing declining issues with 63% of all stocks advancing versus 33% declining. New highs were up to 249 and new lows 79. Note how the volume is leaning more toward the highs now and we are beginning to see better 52 week high numbers once again.
Market Direction Closing For Nov 14 2013
The S&P 500 closed at 1,790.62 up 8.62 or another half percent. The Dow closed at 15,876.22 up 54.59. The NASDAQ closed at 3,972.74 up 7.17 and back within striking distance of 4,000. Impressive indeed.
The IWM ETF closed at $110.40 down just 0.11 but still unable to recapture the previous all-time high and push beyond it.
Market Direction Technical Indicators At The Close of Nov 14 2013
Let’s review the market direction technical indicators at the close of Nov 14 2013 on the S&P 500 and view the market direction outlook for Nov 15 2013. I have made a few changes to the technical signals to assist all of us in following the signals. I am including the S&P 500 daily chart for just over a month and I will be showing support lines as well. I have also dropped some arrows from those technical indicators that have more than one readings to follow, such as the stochastic indicators and MACD. With the other indicators the red arrow is pointing to today’s signal.
The most important support line in the S&P 500 at this time in the ongoing rally remains 1750. On Nov 8 the S&P bounced off that support level and is now pushing higher. This continues to build stronger support at 1750.
For Momentum I am using the 10 period. Momentum is positive today and climbing higher.
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 sell signal of Nov 7 was not confirmed so we now have a new up signal today (Nov 14) with a slightly positive signal of 0.18.
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 overbought.
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 and it is extremely overbought. The D% reading is catching up to K% which could signal some further weakness tomorrow but the bias is still to the upside.
Market Direction Outlook And Strategy for Nov 15 2013
The window dressing that is going on and Yellen’s testimony continued today to be the driving force behind the rally. The news out of Europe that the economies of even Germany are slowing considerably only buoyed investors more. The belief is that the central banks cannot afford to raise interest rates and in all probability will have to continue to pump money into their systems. This remains the biggest supporter of continued higher prices for stocks. How much longer this can last is probably dubious at best but who would have thought 5 years after the collapse of Lehman Brothers interest rates would still be at near zero and recovery efforts would still be so anemic. If the new Fed chairman decides to commence scaling back I doubt it will occur before 2014 and not before the Spring. Unemployment is too high and the recovery incredibly uneven. There are monstrous problems facing municipalities, states and the federal government. Everything from public pension plans to healthcare to infrastructure to military spending are in turmoil. These issues cannot be resolve quickly and I question is many will be resolved completely at all.
But for now the mood remains bullish and investors are continuing to pour their money into stocks. The amount of capital being dumped into stocks is about to surpass the last great year of capital inflows, 2000.
For myself, my strategy is unchanged. I continue to sell puts on stocks I like and I see nothing yet that has warned me to pull back on cash being risked.
For tomorrow, another options expiration day is upon us. The last two days have been wonderful and we are back to oversold again. But whereas the Fast Stochastic is showing some concern with the oversold nature of the market, there are no signs that the market is ready to pull back. For Friday it appears another green day is upon us and stocks should move higher even if only slightly.
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