The market direction outlook for today was for the market direction to move sideways but continue to give higher closes. The employment numbers today buoyed investors before the market opened. The 148,000 new jobs seemed to make investors feel that the Fed wouldn’t be tapering this year. That belief pushed investors to open the market higher and continue buying stocks. The pace of buying is strong and the outlook is remaining positive for most investors. But this rally is nothing new for 2013.
October 2013 Stock Market Rally
The rally for October seems impressive and while it may seem so, this is not new for the market this year. In fact it isn’t new for almost any year. The S&P has moved almost 110 points higher since the rally started 10 days ago.
April – May 2013 Stock Market Rally
The rally for April to May saw the market direction climb 80 points in 8 days before a two day sideways action developed. Two days later with the overbought condition slightly worked out, the S&P climbed another 80 points in 14 additional trading days.
January 2013 Stock Market Rally
The January stock market rally saw the S&P 500 gain 90 points in 19 days before turning sideways to work out an overbought condition.
Overbought Condition for Market Direction
All of these rallies have similar characteristics including turning sideways for a few days while working out a market direction overbought condition. That is the clue to be watching for. The market direction needs to move sideways to work out being so heavily overbought. As long as it stays trending sideways as in the previous rallies this year then we know that the rally will continue shortly after. The only similarity is the size of the rally. 80 to 100 points before stalling is not anything new. With the market direction for October now up 110 points we should see the market turn sideways any day now and then continue moving higher. The next clue then is whether the market turns higher.
Other Economic News for Oct 22 2013
A few other events worth mentioning include that August job creations numbers were revised upward from 169,000 to 193,000. When the US economy cranks out 200,000 plus jobs in a month it is a clear signal that the economy is improving. August was a rare month with a figure as high as 193,000. While September may show just 148,000 watch if next month that figure is revised upward. I have no way of knowing what the Fed plans to do, but I do know that staying with the market trend and staying cautious with my stock selections is the best way to continue to profit and protect against any surprises from the Fed.
Construction projects in August were solid including in residential building as activity is not at the highest level in four years with a 0.6 percent increase in August over July.
Wild Day For Netflix Stock
Yesterday after hours Netflix reported earnings that quadrupled as they attracted 1.3 million more subscribers in its latest quarter. It earned 52 cents per share which was 4 cents higher than estimated. Revenue rose 22 per cent from last year to $1.1-billion to match analyst projections. After hours on Monday Netflix stock surged over 7 percent. At the open today though the stock commenced a plunge falling from $389.16 where it opened to close down over 9 percent to $322.52 on what appears to have been a wave of profit taking. The stock marked its second heaviest day of trading this year with over 25 million shares trading.
Market Direction S&P 500 Intraday For Oct 22 2013
The intraday 1 minute chart for the S&P 500 points continues to show the usual typical morning plunge. This morning plunge is boosting my Trading For Pennies Strategy trades each day. I have been unable to post all my daily trades in the Trading For Pennies Strategy but the returns are simply outstanding.
You can see in the chart below the euphoria over the employment numbers. The rest of the day the market tried to rally back to those early morning highs but failed. The close was decent and continues to point to overwhelming strength in this market. Do you ever notice how when the market direction is booming there is little negative news and then suddenly we get a string of negative reports. I am not a conspiracy believer but it does really make one wonder.
Advance Declines For Oct 22 2013
The advance – decline ratio continues to point to an overheated market. This is the third day of very strong advancing numbers and it will not last. Advancing issues were 71% of all volume and just 26% were declining. New highs though were 429 and new lows 66. Yesterday the market took a bit of a rest but the new highs were still strong. More sideways days must be ahead for the market direction to be able to consolidate and then push higher as you can see in the charts from previous rallies at the start of this market direction post.
Market Direction Closing For Oct 22 2013
The S&P 500 closed at 1,754.67 up 10.01 and another record high. The Dow closed at 15,467.66 up 75.46. The NASDAQ closed at 3,929.57 up 9.52 which marked another new 13 year high. IWM ETF closed up just 0.26 or 29 cents to $110.76 another new high but the strength in today’s move was muted. The Russell 2000 is showing stress now and I believe is signaling that the rally is about to turn sideways.
Market Direction Technical Indicators At The Close of Oct 22 2013
Let’s review the market direction technical indicators at the close of Oct 22 2013 on the S&P 500 and view the market direction outlook for Oct 23 2013.
For Momentum I am using the 10 period. Momentum continued to push higher today and with a reading of 105.99 momentum is now pushing to stronger readings than any rally since late 2011. That means this rally back from the debt ceiling resolution has set a record in momentum that surpasses any momentum reading in 2012 or 2013 to date. This kind of reading shows how overbought the market direction remains. The market will rest and soon.
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 MACD continued to climb 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 once again heavily overbought after a one day rest.
Rate Of Change is set for a 21 period. The Rate Of Change continued positive today and climbed even higher showing the strength of the recovery from investors jumping into the market. The rate of change is reaching strong readings once again.
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 down to neutral. it is 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 down to neutral and it too is extremely overbought.
Market Direction Outlook And Strategy for Oct 23 2013
Investors are always a moody bunch. They will be pretty unhappy if the fed ever did start tapering this year. Don’t believe any analysts who comments that any Fed tapering this year is built into the market or will be taken in stride by the market. Just remember how many said any rally from the debt-ceiling was already baked into the market. Don’t you just love that term, baked in. Yeah, right. These kinds of events are game changers for investors. No tapering by the Fed means continued liquidity for the markets and continued historic low-interest rates. Investors in stocks love both. Even bond king Bill Gross has commented how he was wrong on his outlook for interest rates this year.
No More Dr. Doom
In fact this market recovery from the depths of 2008 has caught so many economists and analysts by surprise that few are even commenting on their predictions of doom and gloom following the collapse of 2008 – 2009. Nouriel Roubini who prided himself on his prediction of the financial crisis, even though he was a few years early, now wants to be known as Dr. Reality and no longer will respond to comments posted to Dr. Doom. But Roubini and his predictions of a global meltdown following the financial crisis and his prediction of a collapse of Greece show that no one can truly judge with any degree of certainty what events may unfold.
True Reality
The true reality of the economic outlook is that no one knows. Instead it is important for investors to set up strategies that can benefit them in every market condition. In the collapse of 2008 to 2009, those investors who used the Ultra Short ETF products have fantastic returns. At the same time those investors who bought stocks throughout 2009 have also done incredibly well. The reality is investing with an understanding that no one can judge what major events may occur can also profit portfolios. Instead of fearing the unknown it is a wonderful feeling to sleep well, tucked in tight with visions of profit making strategies running through our heads each night so that come morning we know how to profit no matter what the market wants to hand us today. You can tell that I sleep very well indeed.
Wednesday’s Outlook
For tomorrow I do believe the market direction up needs a rest. The clues are everywhere but that does not mean the market will turn sideways just yet. Momentum is incredibly strong and the 52 week highs continues unhindered. There could still be a couple more days left. However both the fast and slow stochastic indicators are signaling that the rally is running out of steam and working on vapors now.
If market direction does turn sideways, look for the clues of the market staying only sideways, not moving back down. For this rally to continue revenue must still surprise to the upside and the market direction cannot push back down. Remember though, every bull market sees corrections. This year we have not have any kind of strong correction. For an aging bull market it is surprisingly nimble and vital.
When the market turns sideways I will be looking through my watch list for stocks to sell puts against and I don’t think it will be many more days before that will be happening. Tomorrow could see the start of a much needed rest to consolidate gains and prepare for another move higher in market direction.
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