The market direction outlook for Wednesday was for the market to hang tough and try to move higher but that a lot of the direction depended on Washington as we come close to the debt ceiling deadline of Oct 17. The market liked the news out of Washington and with hopes pinned high, investors bought the market and shoved it a lot higher as the day came to a close.
Market Direction S&P 500 Chart For Oct 16 2013
The first chart to look at is the S&P 500 chart for the past couple of months. You can see that today the market closed on the highs. Now at 1721.54 the S&P is ready to break the old all-time high of 1729.86 set on September 19. Analysts who were bearish just a week ago have suddenly become quiet.
Market Direction Dow Index Chart for Oct 16 2013
The Dow has a bit further to go to break its old record. On Sept 18 it made a new intraday high of 15709.58. Today the market closed at 15,373.83 on the highs for the day and now 336 points away from its all-time high.
Advance Declines For Oct 16 2013
Today advancing stocks outpaced advancing ones. 78% of the volume was advancing today with just 19% positive. The number of new highs though shows the real strength in the market direction higher. 272 new highs versus 95 new lows.
Market Direction Closing For Oct 16 2013
The S&P 500 closed at 1,721.54 up 23.48. The Dow closed at 15,373.83 up 205.82 points for the third best rally of the year. The NASDAQ closed at 3,839.43 up 45.42. IWM ETF closed up 1.24% erasing yesterday’s losses and closing at a new high of 108.49.
Market Direction Technical Indicators At The Close of Oct 16 2013
Let’s review the market direction technical indicators at the close of Oct 16 2013 on the S&P 500 and view the market direction outlook for Oct 17 2013.
For Momentum I am using the 10 period. Momentum on Monday pushed higher into positive territory. Momentum instead of falling negative turned back up and closed with a strong finish.
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 Oct 14 and today we saw the confirmation of that buy signal with a strong 2.00 reading.
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 overbought.
Rate Of Change is set for a 21 period. The Rate Of Change turned negative yesterday and stayed negative today. Once again the reading is very close to neutral and reflects continued investor nervousness.
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 now extremely 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 for tomorrow is also up sharply and it too is extremely overbought.
Market Direction Outlook And Strategy for Oct 17 2013
Sometimes all you need is hope. With fingers crossed investors have bought back stocks over the past 6 trading days with just one losing day, yesterday. They definitely remain concerned and nervous but they do believe no politician would want the country to default. With that attitude in hand, investors have pushed stocks back into overbought territory. With the news this evening that Congress passed the bill and have extended the debt ceiling and reopened the government, I would expect little movement lower tomorrow.
The overbought market could last longer than a day or two but the chance of a severe correction is off the table in my opinion. The market direction should now be able to push into new virgin territory, which is sure to confound a lot of analysts and investors alike. For me I am continuing with my Put Selling and sold puts today on Intel Stock as I discussed in yesterday’s market direction column. For tomorrow I will be looking for other opportunities and will be watching the Weekly Initial Unemployment Insurance Claims for any clue that could affect the market direction.
Overall I think the market direction may drift here for a a day or two to work out the overbought condition but the bias remains to the upside.
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